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Conglomeration enables diversification

Conglomeration of commercial and investment banking allows financial institutions to diversify their businesses and risks.

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The Global Financial Crisis
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Long-term causes of the financial crisis?
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Unintended consequences of earlier public policy choices
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Investment banks incentivised to move into riskier activities
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How were investment banks incentivised to increase risk?
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Allowing mixing of commercial and investment banking in 1990s
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Enabled commerical and investment banking conglomeration
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Conglomeration enables diversification
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Advantages seen in Bank of America acquisition of Merrill Lynch
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Model proven in Europe
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Risks increase while logic of conglomeration unfolds
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Investment banks gain access to more stable source of funds
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