Improved Measures of Commercial Banking Output and Productivity: New Comprehensive Measures of Commercial Banking Output and Productivity More Accurately Reflect the Changes That Have Occurred in the Industry, Including Deregulation, Advances in Technology, and the Development of New Banking Services

By Royster, Sara E. | Monthly Labor Review, July 2012 | Go to article overview

Improved Measures of Commercial Banking Output and Productivity: New Comprehensive Measures of Commercial Banking Output and Productivity More Accurately Reflect the Changes That Have Occurred in the Industry, Including Deregulation, Advances in Technology, and the Development of New Banking Services


Royster, Sara E., Monthly Labor Review


The services that commercial banks offer have changed greatly since the 1980s because of deregulation, the expansion of information technology, and innovations in the types of services offered. Traditionally, commercial banks' primary services included facilitating transactions, providing loans, and safekeeping money and other valuables. However, with the repeal of the regulatory limits of the Glass-Steagall Act, banks began performing an increasing variety of functions, including providing investment advice, underwriting securities, and writing insurance policies. (1)

Deregulation allowed commercial banks to hold riskier financial assets on their balance sheets and to merge with investment banks. As a result, banks expanded the types of services they offered and the fees from these services became a larger share of bank revenue. Commercial banks took advantage of the lower reserve requirements for investment banks, which allowed them to take on more debt and potentially earn higher profits. Deregulation also removed the prohibition on interstate banking, allowing commercial banks to operate freely across state lines. Increased competition because of deregulation caused a number of bank failures and triggered a series of mergers and acquisitions. Banks benefited from economies of scale as bank mergers resulted in larger and fewer banks. In addition, larger banks began merging with smaller local banks, thereby gaining access to their branch networks.

The recent financial crisis dramatically underscored the changes in the structure of the commercial banking industry that occurred with the proliferation of risky new investment products, the liberalization of lending practices, and the merging of commercial and investment banks. Many banks were forced to take large write-offs as the value of their assets fell sharply. The crisis led to the collapse of several major financial institutions, widespread mortgage foreclosures, and economic recession. The crisis also emphasized the changing role of banks, fostered new regulation to avoid future financial problems, and reinforced the need for improved measures of output and productivity in the commercial banking industry.

Advances in information technology over the last few decades also greatly increased productivity in commercial banking by enabling banks to offer many new services without a proportional increase in staff. Rising customer usage of online banking and automated teller machines (ATMs) has allowed banks to expand their presence into new areas while, at the same time, reducing costs and minimizing branch staff. (2) Banks now process the majority of payments electronically, including direct payroll deposits, funds transfers, and electronic bill payments. The increasing popularity of e-commerce has prompted banks to employ several new related products, such as identity encryption technologies, Internet portals, and electronic billing. (3) The computerization of interest rate adjustment, credit checks, and other accounting and auditing activities has sharply reduced the amount of time bank staff devotes to them. Banks have invested heavily in electronic data processing technology, and its proliferation has resulted in rising output, falling costs, and soaring productivity in the industry.

Deregulation and advances in information technology have shifted the types of services that commercial banks offer. For example, as electronic payments have replaced traditional payment methods, the number of deposit accounts at commercial banks has declined steadily. (4) At the same time, banks have developed an increasingly wide variety of savings and investment vehicles and pursued other business opportunities, such as underwriting debt or offering mutual funds, to acquire new sources of revenue and enable them to compete with other financial services companies. As a result, these new services have become an important source of income for commercial banks. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Improved Measures of Commercial Banking Output and Productivity: New Comprehensive Measures of Commercial Banking Output and Productivity More Accurately Reflect the Changes That Have Occurred in the Industry, Including Deregulation, Advances in Technology, and the Development of New Banking Services
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Author Advanced search

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.