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Journal Articles Journal of Banking Regulation Year : 2019

The universal bank model: Synergy or vulnerability?

Xi Yang
  • Function : Author


In this paper, we examine the costs and benefits of diversification and expansion into non-traditional activities on the bank level. Using detailed information on the US banking sector over the period 2002–2012, we investigate whether or not banks’ involvement in various business lines has been associated with higher risks and returns. Using cross-sectional analysis, we find evidence that banks’ expansion into non-traditional activities has lacked revenue and diversification benefits: The overall risks of non-traditional banks have been higher, while returns were not. A higher degree of diversification across traditional and certain non-traditional activities, on the contrary, has been associated with higher returns and risk-reduction benefits. The results thus indicate that diversification prior to the financial crisis proved effective in the crisis environment, whereas too high involvement in non-traditional businesses did not. These results hold for small and large banks, banks of different tax status and various profitability and risk measures.

Dates and versions

hal-02504214 , version 1 (10-03-2020)



Xi Yang, Michael Brei. The universal bank model: Synergy or vulnerability?. Journal of Banking Regulation, 2019, 20 (4), pp.312-327. ⟨10.1057/s41261-019-00096-y⟩. ⟨hal-02504214⟩
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