Integrating and consolidating banking operations
However, consolidation can yield significant cost benefits.For a typical regional bank with retail and commercial businesses, 30 percent of total costs are variable by volume, 35 percent are driven by the branch network, and another 35 percent are “scalable” costs driven by organizational complexity.
Moreover, these differences change over time, since financial systems and regulations are not static; in recent decades banking reforms have increased the similarity of U. Regulatory reforms have played an important role in shaping the U. In March of 2000 the Gramm-Leach-Bliley Act extended the banking industry's ability to offer securities and insurance services through the creation of financial holding companies.8 This banking reform now affords U. banking institutions the opportunity to provide a broader and more competitive array of financial services, more like banking institutions in many other developed nations, including those in the European Union. has a highly developed set of competitive financial institutions and financial markets. financial markets has contributed to the shift in financial services from traditional banks to other financial intermediaries and financial markets. The Federal Reserve regulates the 902 state-chartered banks that are members of the Federal Reserve System.
State and federal regulations — particularly a ban on interstate banking — that remained in place until the 1980s discouraged concentration in the banking sector. Merely to raise the return on equity in the sector to equal their 10 percent long-term cost of capital, banks would need to increase cumulative pretax profits by 35 percent — a total of billion per year.
Although these restrictions have largely been repealed, the U. still has more than 15 times the number of regulated depositories as the U. The top four to six banks in each of those countries account for 90 percent or more of total deposits. This increase would need to come from a combination of cost reengineering and revenue growth.
Net interest income has been flat in the post-2007 era, thanks to the low interest rate environment and flat yield curve.
Digitization and new regulations have also driven down volumes and margins across capital-markets and sales and trading businesses.Noninterest income has also been flat, due to a series of postcrisis legislative initiatives that adversely affected fee-based revenue in deposit taking, credit cards, and payments.