Journal Article

On the portfolio effects of financial convergence - a review of the literature

Abstract: This paper reviews the literature on the effects of combining banking and nonbank financial activities on banking organizations' risk and return. In general, securities activities, insurance agency, and insurance underwriting are all riskier and more profitable than banking activities. They also have the potential to provide diversification benefits to banking organizations. While real estate agency, title abstract activities, and real estate operation are more profitable than banking, real estate development may not be. Real estate activities are riskier than banking activities in general, and their diversification benefits for banking organizations are less clear.

Keywords: Banking Act of 1933; Bank investments; Risk;

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Bibliographic Information

Provider: Federal Reserve Bank of San Francisco

Part of Series: Economic Review

Publication Date: 1999

Pages: 18-31

Order Number: 2