Is the Traditional Banking Model a Survivor?

We test whether small US commercial banks that use a traditional business model are more likely to survive than non-traditional banks during both good and bad economic climates. Our concept of bank survival is derived from Stigler (1958) and includes any bank that does not fail or is not acquired. We define traditional banking by four hallmark characteristics: Relationship loans, core deposit funding, revenue streams from traditional banking services, and physical bank branches. Banks that adhered more closely to this business strategy were an estimated 8 to 13 percentage points more likely to survive from 1997 through 2012 compared to other small banks using less traditional business strategies. This survival advantage approximately doubled during the financial crisis period

Economic Activity and Credit Market Linkages: New Evidence from Italy

We investigate the interactions between the real economy and credit markets in Italy, focusing in particular on how the business cycle influences the risks of the banks’ loan portfolio (i.e., the real effect), and in turn how the credit market affects the real economy (i.e., the credit supply effect). We find evidence of both effects, with the former conveyed primarily by the creditworthiness of large firms. Moreover, we disentangle credit supply shocks due to factors inside the banking sector (the bank lending channel) from those outside the banking sector (the borrower’s balance-sheet channel), and find that both channels have a negative and significant effect on gdp growth

Income Diversification and Bank Performance: Evidence from Italian Banks

Diversification, bank risk, bank return, non-interest income, G21,