Re-evaluating the Separation of Banking and Commerce in the Era of BigTech: A Canonical Approach

초록

Advances in information technology have given bigtech companies an informational advantage over banks. This development has two opposing implications: it (i) can narrow the information gap between banks and borrowers, while (ii) calling into question the traditional separation between banking and commerce. Assuming that no substantial information gap exists between bigtechs and banks and that bigtechs can own banks, this study examines how banks’ lending decisions vary with ownership structure and how these decisions, in turn, affect allocative efficiency and the risk of bank failure. We show that integrating banks and bigtech can improve efficiency by extending additional loans to efficient but distressed firms that would otherwise be unable to obtain interim funding. This efficiency gain, however, is driven by the sharing of bigtech firms’ information with banks. We also identify a scenario in which only a bigtechaffiliated bank lends to its subsidiary, and such lending can be ex ante inefficient because of distorted incentives within the conglomerate. Nonetheless, lending by an affiliated bank can increase ex ante welfare when the borrowing firm is of a high-risk, high-return type. At the same time, it may create a time-consistency problem for regulation, preserving a potential role for maintaining some degree of separation between banking and commerce.

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