Banking and commerce: A liquidity approach |
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Institution: | 1. Audencia Business School, 8 Route de la Jonelière, 44312, Nantes, France;2. CUNEF (Colegio Universitario de Estudios Financieros), Calle de Leonardo Prieto Castro 2, 28040 Madrid, Spain;3. SKEMA Business School – Université Côte d''Azur, 60 rue Dostoïevski B.P.085, 06902 Sophia Antipolis, France |
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Abstract: | This paper looks at the advantages and disadvantages of mixing banking and commerce, using the “liquidity” approach to financial intermediation. Bringing a nonfinancial firm into a banking conglomerate may be advantageous because it makes it easier for the bank to dispose of assets seized in a loan default. The conglomerate's internal market increases the liquidity of such assets and improves the bank's ability to perform financial intermediation. More generally, owning a nonfinancial firm may act either as a substitute or a complement to commercial lending. In some cases, a bank will voluntarily refrain from making loans, choosing to become a non-bank bank in an unregulated environment. |
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