Skip navigation
Hidden Cost of Better Bank Services
Report

Hidden Cost of Better Bank Services

Carefree Depositors in Riskier Banks?


auto-generated audio
auto-generated audio

Editorial Rating

8

Qualities

  • Analytical
  • Innovative
  • Overview

Recommendation

Many banks in search of deposits to fuel their lending offer depositors expanded ATM networks, more branches, extended hours and other amenities. Generous customer-service practices secure funding at a lower cost to banks; however, an unsettling trade-off emerges. Economists Dong Beom Choi and Ulysses Velasquez explain the paradoxical relationship between broad service options and poor loan quality in this groundbreaking research report. getAbstract highly recommends this academic but insightful study to financial professionals and bank depositors.

Take-Aways

  • In the United States, a number of banks use customer deposits as their primary means to fund loans.
  • To attract deposits, these banks tend to offer extensive service options and amenities to their customers.
  • Banks providing substantial services to depositors generate a high volume of deposits at a low funding rate and with a decreased level of capital outflow risk.

About the Authors

Economist Dong Beom Choi and senior analyst Ulysses Velasquez work at the Federal Reserve Bank of New York.