Resolving the scale efficiency puzzle in banking

Article Abstract:

Article presents the problem and solution for why most previous empirical research on scale efficiency in banking has found increasing returns to scale for small banks and decreasing returns to scale among larger banks. This study identifies the bias as the result of problems in the statistical techniques employed and a missed input required for the intermediaton process, financial capital. Relationship among size, diversification and risk is properly accounted for after the econometric problems are solved.

Economies of scale

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Bank capital requirements for securitized loan pools

Article Abstract:

A study was conducted on the riskiness of credit enhancements offered on securitized pools of commercial and industrial loans. The results suggest that the proposed new capital requirements for recourse and other credit substitutes are better than the current rules. A preferred regulatory framework would be to have a broad range capital requirements for a wide array of risk categories.

Analysis, Asset-backed securities, Asset backed securities, Bank capital

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Nontraditional activities and the efficiency of US commercial banks

Article Abstract:

An analysis of the efficiency effects of nontraditional activities of US banks reveals that standard models omitting nontraditional activities tend to underestimate bank efficiency. The study uses net noninterest income as a measure of nontraditional output and shows that if nontraditional activities as a type of output are factored in, the relative rankings of banks may change.

Commercial Banking, Research and Development in the Social Sciences and Humanities, Management Science, Commercial banks, Financial services industry, Financial services

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