Working Paper
Efficient banking under interstate branching
Abstract: Nationally chartered banks will be allowed to branch across state lines beginning June 1, 1997. Whether they will depends on their assessment of the profitability of such a delivery system for their services and on their preferences regarding risk and return. The authors investigate the probable effect of interstate branching on banks' risk-return tradeoff, accounting for the endogeneity of deposit volatility. If interstate branching improves the risk-return tradeoff banks face, banks that branch across state lines may choose a higher level of risk in return for higher profits. The authors find distinct efficiency gains due to geographic diversity.
Keywords: Branch banks; Interstate banking;
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Bibliographic Information
Provider: Federal Reserve Bank of Philadelphia
Part of Series: Working Papers
Publication Date: 1996
Number: 96-9