Question

1. Factors - Analyze factors that contributed to the obsolescence or dissolution of The Banking Industry, Bank of America.

Answer 1

Several factors led to the obsolescence or dissolution of The Banking Industry, Bank of America. First of all commercial banking was late in keeping pace with the technological advances and changing customer preference that was taking place in the financial sector in USA and across the world. The enormous growth in money market enabled the operation of a payment system in which the liabilities payable on demand are backed by a diversified portfolio of liquid securities. This system is also referred to as mutual fund banking. Mutual fund banking is systematically much more robust than the commercial banking system as it is not exposed to the risk of panics or runs. Now money market mutual funds are available with checking facilities and this in part led to the obsolescence of The Banking Industry, Bank of America. Secondly several business establishments are borrowing directly from non-banking financial institutions and also borrowing directly from investors by issuing different forms of debt obligations like commercial paper.

The obsolescence or dissolution of The Banking Industry, Bank of America can be primarily attributed to technological innovations. Commercial banks failed to keep pace with technological innovations that were taking place and so investors started making their own evaluation regarding credit risk and market risk. Technological innovations have led the consumers to increasingly do their banking online and so the presence of physical bank branches has also become redundant.