WASHINGTON - Banks hoping to reap savings by consolidating decision making at the home office may be in for a nasty surprise, according to an economist at the Federal Reserve Bank of Chicago.
William C. Hunter, the Chicago Fed's director of research, wrote in the September/October issue of Economic Perspectives that centralized decision increases costs as much as 9.6%.
Centralizing the delivery of services didn't work either, he said. "In no case did centralized delivery systems reduce costs as envisioned by proponents," Mr. Hunter said.
Mr. Hunter, who examined the organizational structures of 118 banks from 1989 to 1991, said researchers should reevaluate his findings after banks have more time to adjust to their new corporate structure.