socialmedian: Big Banks Are NOT More Efficient

Add News Flash

User-submitted headlines for this story

Clip

Big Banks Are NOT More Efficient

Submitted by Jgmize from Google Reader

Oct 27, 2009

Summary

I have repeatedly pointed out that big banks are not more efficient than smaller banks.

For example, I previously noted that an article in Fortune concluded:

The largest banks often don't show the greatest efficiency. This now seems unsurprising given the deep problems that the biggest institutions have faced over the past year.

"They actually experience diseconomies of scale," [Celent analyst Bart] Narter wrote of the biggest banks. "There are so many large autonomous divisions of the bank that the complexity of connecting them overwhelms the advantage of size."

Now, James Kwak has done some sleuthing and discovered that even Fed economists don't buy the bigger-is-more-efficient argument. Kwak points out that New York Fed economist Kevin J. Stiroh found that most of the increase in efficiency during part of the time in which banks were consolidating was due to the increased use of information technologies:
His main explanation for the productivity growth is not consolidation, but information technology: “The finding of steady productivity growth, in p ...Read the full article

Comments (0)

Add Your Comment