Universal banking and US banking in the 1990s

Results of a test for differential performance applied to data for universal and non‐universal banks revealed that the performance of universal banks was not superior to that of the non‐universal banks. The study, therefore, does not support the performance theory as a basis for the global trend towards universal banking. Rather, there is implied support for the theory that loss of comparative advantage by commercial banks in the credit market and an increasingly competitive global market for financial services are both pushing major countries to adopt the universal model. Specific attention was given to the NAFTA countries bordering the USA. A test for convergence revealed that relatively new universal banks in those countries were converging towards the performance levels of other established universal systems; the project impact on the non‐universal US banking system in the 1990s is of serious concern.