Banking and Commerce: A Liquidity Approach

34 Pages Posted: 13 Dec 2005

See all articles by Joseph G. Haubrich

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 G. Haubrich (Contact Author)

Federal Reserve Bank of Cleveland ( email )

East 6th & Superior
Cleveland, OH 44101-1387
United States
216-579-2802 (Phone)
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João A. C. Santos

Federal Reserve Bank of New York ( email )

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


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