Universal Bank Case Study

According to Cheang (2004), the universal bank can be defined as the banking system in which the bank offer the whole variety of financial products and services. He also states that it combines both investment banking and commercial banking, for example, lending and taking a deposit, selling insurance, issuing underwriting, investing and trading in securities. To me therefore, the universal bank refers to the banking system which operates completely financial services like a supermarket.

It is impossible to against with the universal banking system. This essay is divided into two sides: the banking side and the customer side. I would argue that both banks and customers need the universal bank. This essay will discuss why both need the universal

Moreover, Schildbach et al (2012) point out that because of a diversification of its operation, the universal bank could produce more stable and less volatile results both upside and downside. There is the empirical evidence by the author indicating since the bubble and depression; there has been an increase in the return on equity (ROE) of the universal bank while the ROE of the specialised banks has decreased gradually. I think that an increase in the ROE means that the universal bank has sufficient profit margin and more power to manage the volatility resulting from the crisis and can balance businesses cycles in the financial market. Likewise, in case of Switzerland during the real estate bubble in the early 1990s, Hellwig (2007) highlights that the universal bank in Switzerland is an example of having greater stability. The Swiss universal bank was one of the large banks that had the ability to use its profit from international security, commercial transactions, or the derivatives business to recompense for losses. He also states

Walter (1996) shows that the total cost of buying multiple products from a single supplier will be less than purchasing services from separated providers. The author gives an example that a service provider offers the lower price, information, monitoring, and other transaction costs to a client. I think that when a customer gets a better price, indeed, the universal bank is needed. Furthermore, the universal bank could facilitate customers concerning a one-stop shopping providing what clients need to meet their increasing demand for a complementary range of financial products. Chan (2011) argued that these clients would enjoy the convenience of the one-stop shopping ranging from different services such as equities, unit trusts, insurance, and gold. Debt (2011) looks at customers ' perspective. He thinks that if there is no the universal banking system, clients must spend much time to find products and services from separate suppliers. The author further states that providing complete services, customers can save much time and get the cost of transactions at a lower price from the one-stop shopping. He gives an example that if clients who need to open a saving account and need to loan as well, the universal bank can provide everything what they need or if corporate customers need to initiate an account and need to issue share or bond, the universal bank also can help