Commercial Banks in the Securities Business: A Review
37 Pages Posted: 13 Dec 2005
Date Written: December 1996
This paper analyzes the potential effects of commercial banks' expansion into the securities business, taking into account the underlying conditions assumed by the modern literature to explain the existence of financial intermediaries. The analysis focuses on the gains claimed to emerge with that expansion, particularly the gains due to information advantages and economies of scope, and on the costs claimed to arise with it, namely, those due to conflicts of interest and risk considerations. In addition, the paper discusses how these effects depend on the corporate structure chosen by banks, and it presents the securities powers of commercial banks in the OECD countries.
JEL Classification: G21, G24, G28
Suggested Citation: Suggested Citation