Gerald A. Hanweck

Competitive viability in banking: Scale, scope, and product mix economies☆

Abstract Conventional scale and scope economies are inadequate to determine the competitive viability of banks that vary in scale and product mix simultaneously. This paper develops two new and more general measures of multi-product economies. Slight diseconomies of scale and product mix are found for banks, usually on the order of 1 to 3 percent, which may be due to demand-side influences. These are robust to differing cost and output specifications, organizational levels, and competitive environments. These results differ from other banking studies that found scope economies, a conflict that may be due to methodological difficulties.

Bank insolvency risk and the market for large certificates of deposit

In this paper, the authors employ a new source of bank survey data to determine whe ther the market for large certificates of deposit exacts a price for bank risk taking. They find strong evidence that this is in fact the case. Proxy measures of the likelihood of bank insolvency, the variab ility of bank returns on assets, and bank capitalization are all foun d to influence jumbo CD rates in a manner consistent with this hypoth esis. Area-specific variables are also found to play an important rol e in explaining observed jumbo CD rates. Copyright 1988 by Ohio State University Press.

Scale Economies in Banking: A Restructuring and Reassessment

THE ISSUE OF scale economies in banking has a rich history. Most earlier studies report modest operating cost scale economies for small institutions (those with less than about

Economies of scale and scope in the securities industry

50 million of deposits in 1968 dollars) but are unclear where these economies might end, if at all. Unfortunately, these studies are limited in four important respects. First, those that were well specified did not measure the total cost of banking operations but concentrated on estimating scale economies for individual banking functions (e.g., demand deposits separately from commercial loans). Second, an average cost curve that could take a U shape over the full range of banks was not fitted, either because larger banks were not included or because of the functional form used (Cobb-Douglas). Consequently, the optimum or minimum cost size of a bank or office could not be determined. Third, the variables measuring the costs of branching were misspecified. Fourth, the branch

What we can expect from interstate banking

Abstract Economies of scale and scope for the securities industry are estimated for the first time using previously unavailable survey data and employing the translog multiproduct cost function model. The results reveal economies of scale for smaller specialized firms and diseconomies of scale for larger more diversified firms. Economies of scope do not appear to be important in the industry. If the Glass-Steagall restrictions are relaxed, the results suggest that banks can enter the securities industry with a brokerage division of moderate scale of about

The growth of the world's 300 largest banking organizations by country

30 million in revenues. The five million in new equity required suggests that only banks with assets over

Recent Trends in the Number and Size of Bank Branches: An Examination of Likely Determinants

1 billion and over

Differential impact on bank valuation of interstate banking law changes

60 million in capital can enter the industry with a relatively modest investment. There are, however, a substantial number of banks with over

Identifying House Price Booms, Bubbles and Busts: A Disequilibrium Analysis from Chaos Theory

1 billion in assets who can be considered as potential entrants.

Residential House Prices, Commercial Real Estate and Bank Failures

Abstract Though interstate banking has been legislatively prohibited, commercial banks have circumvented these restrictions. This has led to proposals to permit interstate banking. In this paper we examine the performance of one set of banks which has been allowed to operate on an interstate basis, namely, those grandfathered by the Bank Holding Company Act of 1956. The data and statistical tests confirm that the grandfathered BHCs have experienced a statistically significant reduction in the share of state deposits and homogenization in their profitability and portfolio composition compared with their peers in the same states over the 1960–1983 period. These results suggest that the ability to operate banks interstate has provided little in the way of long-run competitive advantages for those BHCs with this privilege. It is unlikely that interstate branching will result in the large money center banks dominating local and regional banking markets.