This paper analyses the potential effects of commercial banks' expansion into
the securities business in the context of the contemporary theory of financial
intermediation. The analysis focuses on the gains claimed to emerge with that
expansion, particularly the gains due to information advantages and economies
of scope, and on the costs also claimed to arise with it, namely, those due to
conflicts of interest and safety and soundness considerations. The paper ends
with a discussion on how these effects depend on the location of the securities
unit within the banking conglomerate.
The views expressed in this publication are those of the authors and do not necessarily reflect the views of the BIS or its member central banks.