Banks as Continuous Reinvention

This article questions these assumptions by presenting mainly aggregate and time-series empirical evidence on banks and banking in Europe and the USA that shows how banks have reinvented themselves in these high income econom- ies, so that they increasingly depend on new activity, indexed generally by the rise of fee income. Thus, retail banks increasingly sell financial services products to households and thereby sustain consumption (not production), while investment banks recently have shifted massively into proprietary or own-account trading as well as continuing to facilitate mergers and acquisitions (M&A). In our view, the drive into these new activities intensifies a variety of business model contra- dictions that are a source of internal tension for individual banks and have uncer- tain medium-term consequences for the organisation of the industry.