Abstract
Do banks enable crime? Does regulation insulate finance from criminal activity? I address these questions using evidence from the drug trade in Mexico, finding that local drug cartel activity causes an increase in bank deposits. Accordingly, branch networks grow in affected areas; this growth is not driven by increased lending opportunities. After the election of a “law-and-order” government, these effects dissipate, with liquidity flowing into branches of U.S. banks along the border. I interpret this as evidence that “finance follows crime” in weak institutional environments, and that, absent transnational policy coordination, regulatory arbitrage via cross-border liquidity flows undermines banking regulation.
Abstract
We study how remote work affects Bank Holding Company (BHC) efficiency in the U.S. in the post-pandemic period. We measure BHC exposure through the work-from-home rate of finance-industry workers in its pre-pandemic markets, separating this staff channel from the local incidence of remote work. Greater staff exposure improves cost efficiency and reduces revenue efficiency with a roughly one-year delay, leaving profit efficiency unchanged. Cost gains are concentrated in banks with large physical and technological footprints; revenue losses are concentrated in relationship-intensive banks. Our findings suggest that remote work shifts the composition of bank production, with implications for bank management and supervision.