infonet-economy

One of the most dramatic trends in banking since 2000 has been the secular movement away from core banking and interest generating activities towards enhanced reliance on non-interest-generating activities that focus largely on fees and trading profits. This has changed the banking model from traditional asset formation, such as deposit taking and lending, towards a model built on fees and non-banking activities. In this paper, we draw on a dataset covering over 10,000 US banks and 542 bank holding companies and find no evidence that this shift in the bank business model harms bank profitability and / or increases failure rates, idiosyncratic risk, or systemic risk.