Suppose the management of the First National Bank of New York decides that it needs to expand its fee-income generating services. Among the services the bank is considering adding to its service menu are investment banking, the brokerage of mutual funds, stocks, bonds and annuities, sales of life and casualty insurance policies, and offering personal and commercial trust services.
1. Describe as many potential advantages as you can that might come to First National as a result of adding these services to its menu.
2. What potential disadvantages might the bank encounter from selling these fee-generating services?
3. Are there risks to the bank from developing and offering services such as these? If so, what are some ways to lower the bank's risk exposure from offering these new services?
4. What might happen to the size and volatility of revenues, expenses and profitability from selling fee-based services like those mentioned above?