Economic Policy Review Executive Summary
The Role of Retail Banking in the U.S. Banking Industry:
Risk, Return, and Industry Structure
Recapping an article from the December 2007 issue
Contact author
E-mail authors
of the Economic Policy Review, Volume 13, Number 3
View full article PDF


18 pages / 587 kb

Authors: Timothy Clark, Astrid Dick, Beverly Hirtle, Kevin J. Stiroh, and Robard Williams

Index of executive summaries
  • In the 1990s, the U.S. banking industry focused largely on diversifying revenues, deemphasizing branch networks, and targeting financial services to a broader range ofclients.

  • Today, the industry is experiencing a “return to retail.” This renewed interest in retail banking is evident in the rising trends in retail loan and deposit shares on commercial bank balance sheets, a shift in household assets toward bank deposits, and a continuing increase in the number of bank branches. Media reports, bank financial statements, and the attention paid by industry analysts also point to banks’ increased emphasis on retail activities.

  • Clark et al. document this strategic shift among U.S. banks and offer insight into why the change has occurred.

  • The authors observe that the principal attraction of retail banking at the bank level appears to be the view that its revenues are stable, so it can offset volatility in nonretail businesses. At the industry level, interest in retail activities fluctuates in predictable ways with the performance of nonretail banking and financial market activities.

  • The article identifies similarities between the recent “return to retail” and past cycles. It argues that the current episode may be more persistent than others mainly because it is being driven almost entirely by the very largest U.S. banking firms, which have been building large branch networks and investing in other retail banking infrastructure.

  • According to the authors, branching deregulation in the 1990s enabled large banks to compete more effectively with smaller local institutions by establishing branch networks spanning large geographic areas. Technological innovation may also have increased scale economies in key retail banking activities, such as small business lending.

About the Authors

Timothy Clark is an assistant vice president, Beverly Hirtle a senior vice president, and Robard Williams a vice president at the Federal Reserve Bank of New York; Astrid Dick was an economist and Kevin J. Stiroh a vice president at the Bank at the time the article was written.


The views expressed in this summary are those of the authors and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System.

By continuing to use our site, you agree to our Terms of Use and Privacy Statement. You can learn more about how we use cookies by reviewing our Privacy Statement.   Close