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Banking and Commerce: A Liquidity Approach

34 Pages Posted: 13 Dec 2005  

Joseph G. Haubrich

Federal Reserve Bank of Cleveland

João A. C. Santos

Federal Reserve Bank of New York

Multiple version iconThere are 2 versions of this paper

Date Written: April 2000


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

Haubrich, Joseph G. and Santos, João A. C., Banking and Commerce: A Liquidity Approach (April 2000). BIS Working Paper No. 78. Available at SSRN: or

Joseph Haubrich (Contact Author)

Federal Reserve Bank of Cleveland ( email )

East 6th & Superior
Cleveland, OH 44101-1387
United States
216-579-2802 (Phone)
216-579-3050 (Fax)

João Santos

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States
212-720-5583 (Phone)
212-720-8363 (Fax)


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