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Working Paper
Fixed Costs in the U.S. Banking System
Fixed costs account for an increasing share of operating expenses in the U.S. banking system. From 1995 to 2026, estimated fixed costs rose from 37 percent to 62 percent as a share of total noninterest expense. Over the same period, estimated marginal and average operating costs declined, loan spreads and net interest margins fell, and estimated loan markups increased by 21 percentage points. These trends are pervasive across banks but are most pronounced among large banks. We develop a model of bank industry dynamics with endogenous fixed costs to rationalize these long-run trends and ...
Journal Article
How Banks’ Technology Spending Affects Performance
Over the past two decades, banks have substantially increased their investment in information technology (IT) and data analytics. We estimate the dynamic relationship between IT spending and bank outcomes related to performance. We find that increased IT spending is associated with higher bank profits, increased income from deposit accounts, and lower loan default rates.