Deregulation, the Internet, and the competitive viability of large banks and community banks

Deregulation, technological change, and increased competitive rivalry are transforming U.S. commercial banking from an industry dominated by thousands of small, locally focused banks into an industry where a handful of large banks could potentially span the nation and control the majority of its bank deposits. This paper examines the comparative strengths and weaknesses of large and small banks in this new environment, and outlines the strategic opportunities and threats that new technology - especially the Internet - pose for U.S. banks. We begin by documenting recent trends in bank size, industry structure, competitive conditions, and bank product mix. We argue that these trends are consistent with a simple competitive strategy framework in which commercial banks choose between two profitable business strategies: (a) a community bank business model in which banks have a local focus, a high cost structure, and sell low volumes of personalized service at high margins, and (b) a global bank business model in which banks have a national or international focus, a low cost structure, and sell high volumes of standardized financial products at low margins. Finally, we discuss how Internet banking is likely to affect this strategic equilibrium. In particular, we analyze how a shift away from brick and mortar branches and toward the Internet delivery channel will reduce the switching costs that currently dissuade retail deposit customers from changing banks. Based on the foregoing analysis, we conclude that the number of small banks will continue to decline in the future - not because the community bank business model is flawed, but because most of the small banks that use this model are poorly run. In the long-run, our analysis suggests that well-run community banks should be able to adapt their business practices to technological change and profitably co-exist with large, globally focussed banks.Banks and banking ; Financial institutions

Teaching Reading in Business Subjects

Anyone can read is the attitude of some people, even people who should know better. The fallacy of such an attitude is realized with the following analogy. Aristotle is known to have said, One learns to be a good flute player by playing the flute. One also learns to be a poor flute player by playing the flute. In the same way, one learns to be a good or poor reader by reading

Whither the community bank? relationship finance in the information age

Banks and banking ; Bank mergers

The past, present, and probable future for community banks

We review how deregulation, technological advance, and increased competitive rivalry have affected the size and health of the U.S. community banking sector and the quality and availability of banking products and services. We then develop a simple theoretical framework for analyzing how these changes have affected the competitive viability of community banks. Empirical evidence presented in this paper is consistent with the model's prediction that regulatory and technological change has exposed community banks to intensified competition on the one hand, but on the other hand has left well-managed community banks with a potentially exploitable strategic position in the industry. We also offer an analysis of how the number and distribution of community banks may change in the future.Community banks

Evidence Inference 2.0: More Data, Better Models

How do we most effectively treat a disease or condition? Ideally, we could consult a database of evidence gleaned from clinical trials to answer such questions. Unfortunately, no such database exists; clinical trial results are instead disseminated primarily via lengthy natural language articles. Perusing all such articles would be prohibitively time-consuming for healthcare practitioners; they instead tend to depend on manually compiled systematic reviews of medical literature to inform care. NLP may speed this process up, and eventually facilitate immediate consult of published evidence. The Evidence Inference dataset was recently released to facilitate research toward this end. This task entails inferring the comparative performance of two treatments, with respect to a given outcome, from a particular article (describing a clinical trial) and identifying supporting evidence. For instance: Does this article report that chemotherapy performed better than surgery for five-year survival rates of operable cancers? In this paper, we collect additional annotations to expand the Evidence Inference dataset by 25\%, provide stronger baseline models, systematically inspect the errors that these make, and probe dataset quality. We also release an abstract only (as opposed to full-texts) version of the task for rapid model prototyping. The updated corpus, documentation, and code for new baselines and evaluations are available at http://evidence-inference.ebm-nlp.com/.Comment: Accepted as workshop paper into BioNLP Updated results from SciBERT to Biomed RoBERT

The Determinants of De Novo Bank Survival

The number of newly chartered, or 'de novo,' commercial banks in the U.S. has increased every year since 1994. These new banks are potentially important for preserving competition and providing credit in consolidating banking markets. However, like other new business ventures, newly chartered banks can be prone to failure. To investigate the long-run financial viability of newly chartered banks, we estimate a 'split-population' duration model for 656 commercial banks chartered in 1984 and 1985. To provide a benchmark, we estimate a similar model for 1,288 small established banks located in the same geographic markets. Our results are consistent with a 'life-cycle' theory of bank failure. Because new banks are heavily capitalized and hold portfolios of unseasoned loans, they are initially less likely to fail than established banks. But rapid asset growth, subpar profitability, and declining loan quality gradually erode their capital stocks. De novo failure rates catch up with, and then surpass, established bank failure rates within five years. After seven years, de novo banks are twice as likely to fail as established banks. We find similar determinants of failure for de novo and established banks, including adverse economic conditions, rapid asset growth, concentrations of risky and illiquid investments, large amounts of purchased funds, and excess overhead spending. For de novo banks that eventually fail, we find that failure is accelerated by concentrations of business loans, large amounts of purchased funds, low capital ratios, and excess overhead spending; failure was delayed by fast asset growth, holding company affiliation, and holding a federal charter. We find no significant evidence that de novo national banks were more likely to fail than de novo state chartered banks, which suggests that the OCC's relatively lenient chartering policies increased local market competition without materially increasing new bank failure. We find that low capital ratios accelerate failure for de novo banks that do fail, but we find that capital ratios do not significantly predict which new banks will eventually fail. Thus, requiring higher levels of capital for young banks does not reduce their probability of failure, but rather serves as a buffer that provides extra time to resolve young banks should they become troubled institutions

Working memory and attention in choice.

We study the role of attention and working memory in choices where options are presented sequentially rather than simultaneously. We build a model where a costly attention effort is chosen, which can vary over time. Evidence is accumulated proportionally to this effort and the utility of the reward. Crucially, the evidence accumulated decays over time. Optimal attention allocation maximizes expected utility from final choice; the optimal solution takes the decay into account, so attention is preferentially devoted to later times; but convexity of the flow attention cost prevents it from being concentrated near the end. We test this model with a choice experiment where participants observe sequentially two options. In our data the option presented first is, everything else being equal, significantly less likely to be chosen. This recency effect has a natural explanation with appropriate parameter values in our model of leaky evidence accumulation, where the decline is stronger for the option observed first. Analysis of choice, response time and brain imaging data provide support for the model. Working memory plays an essential role. The recency bias is stronger for participants with weaker performance in working memory tasks. Also activity in parietal areas, coding the stored value in working, declines over time as predicted

Reflecting on nostalgic, positive, and novel experiences increases state Openness

Objective Personality change is a growing field of interest, but relatively few studies have examined causes of change in Openness. We investigated whether it is possible to influence state Openness, and through what mechanisms this effect may occur. Method In two experiments (Study 1: N = 144, Mage = 36.4, 58% female, 88% White; Study 2: N = 269, Mage = 34.0, 60% female, 91% White), participants reflected on and wrote about a personal experience requested to be either: nostalgic; positive and novel (Study 1); positive or novel (Study 2); or ordinary. They rated the events for nostalgia, positivity, novelty, and sociality, and completed measures of state positive affect, self‐esteem, social connectedness, meaning in life, and state Openness. Results Participants who recalled positive and/or novel events reported greater state Openness than those who recalled ordinary events. In Study 1, this also applied to those recalling nostalgic events. Event ratings of positivity (both studies), nostalgia and novelty (Study 2) independently predicted state Openness. State positive affect and self‐esteem were independent predictors in both studies, suggesting possible indirect paths. Conclusions Reflecting on nostalgic, positive, and novel experiences can increase state Openness. This finding may be useful for interventions targeting trait‐level change

Cognitive function and mood at high altitude following acclimatization and use of supplemental oxygen and adaptive servoventilation sleep treatments.

Impairments in cognitive function, mood, and sleep quality occur following ascent to high altitude. Low oxygen (hypoxia) and poor sleep quality are both linked to impaired cognitive performance, but their independent contributions at high altitude remain unknown. Adaptive servoventilation (ASV) improves sleep quality by stabilizing breathing and preventing central apneas without supplemental oxygen. We compared the efficacy of ASV and supplemental oxygen sleep treatments for improving daytime cognitive function and mood in high-altitude visitors (N = 18) during acclimatization to 3,800 m. Each night, subjects were randomly provided with ASV, supplemental oxygen (SpO2 > 95%), or no treatment. Each morning subjects completed a series of cognitive function tests and questionnaires to assess mood and multiple aspects of cognitive performance. We found that both ASV and supplemental oxygen (O2) improved daytime feelings of confusion (ASV: p < 0.01; O2: p < 0.05) and fatigue (ASV: p < 0.01; O2: p < 0.01) but did not improve other measures of cognitive performance at high altitude. However, performance improved on the trail making tests (TMT) A and B (p < 0.001), the balloon analog risk test (p < 0.0001), and the psychomotor vigilance test (p < 0.01) over the course of three days at altitude after controlling for effects of sleep treatments. Compared to sea level, subjects reported higher levels of confusion (p < 0.01) and performed worse on the TMT A (p < 0.05) and the emotion recognition test (p < 0.05) on nights when they received no treatment at high altitude. These results suggest that stabilizing breathing (ASV) or increasing oxygenation (supplemental oxygen) during sleep can reduce feelings of fatigue and confusion, but that daytime hypoxia may play a larger role in other cognitive impairments reported at high altitude. Furthermore, this study provides evidence that some aspects of cognition (executive control, risk inhibition, sustained attention) improve with acclimatization

Influence of Translocations on Eastern Wild Turkey Population Genetics in Texas

Between 1979 and 2006, over 7,000 eastern wild turkeys (Meleagris gallopavo silvestris) from 16 states were translocated to east Texas in an attempt to restore a stable, huntable population. Although current populations are stable in some areas and a spring male-only hunting season was opened in 1995, turkey density in the region remains low and large areas of apparently suitable habitat are not occupied. The longterm effects of the extensive translocations and current levels of connectivity among various populations are unknown. We used microsatellite DNA analysis to assess the influence of translocations on current genetic structure and gene flow in eastern wild turkeys. The influence of translocations was clearly evident and reflected historical contributions from the Midwest and southeastern United States. The east Texas population consisted of 3 distinct genetic clusters. Despite a lack of clear geographic barriers and nearly contiguous forest cover in much of the east Texas landscape, regional gene flow among clusters appeared to be limited. Diversity in the regional population remains high, but we recommend that regulations reflect the current population structure and that long-term efforts should be made to increase connectivity among wild turkeys in the region