Banking and Commerce: A Liquidity Approach

Haubrich, Joseph G.; Santos, João A. C.

doi:10.2139/ssrn.237170

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Banking and Commerce: A Liquidity Approach

BIS Working Paper No. 78

34 Pages Posted: 13 Dec 2005

See all articles by Joseph G. Haubrich

João A. C. Santos

Federal Reserve Bank of New York; Nova School of Business and Economics

There are 2 versions of this paper

Date Written: April 2000

Abstract

This paper looks at the advantages and disadvantages of mixing banking and commerce, using the "liquidity" approach to financial intermediation. Bringing a nonfinancial firm into a banking conglomerate may be advantageous because it may make it easier for the bank to dispose of assets seized in a loan default. The internal market formed inside the banking and commerce conglomerate increases the liquidity of such assets and improves the bank's ability to perform financial intermediation. More generally, owning a nonfinancial firm may act either as a substitute or a complement to commercial lending. In some cases, a bank will voluntarily refrain from making loans, choosing to become a non-bank bank in an unregulated environment.

Keywords: Banking, commerce, liquidity, synnergies, economies of scope

JEL Classification: G21, G28, G34

Suggested Citation: Suggested Citation

Haubrich, Joseph G. and Santos, João A. C., Banking and Commerce: A Liquidity Approach (April 2000). BIS Working Paper No. 78, Available at SSRN: https://ssrn.com/abstract=237170 or http://dx.doi.org/10.2139/ssrn.237170