within an industry and over time. they suggest that for banks – unlike emphasize the similarities between deposits and loan commitments, and the cost savings that accrue to an institution that offers both products. in this calculation and those that follow, we eliminated from the sample the very smallest banks – those with less than $ 1 billion in assets. we did so because otherwise, these banks – which are extremely numerous but account for only a small fraction of total banking system assets – would dominate any statements we might make about percentiles of the population distribution. bis central bankers ’ speeches non - financials, and counter to the spirit of modigliani and miller ( 1958 ) – an important part of their economic value creation happens on the liability side of the balance sheet, via deposittaking. the second fact, which is perhaps just a bit more surprising, is that the asset side of banks ’ balance sheets – and, in particular, their mix of loans versus securities – is considerably more heterogeneous. in the 2012 cross section, a bank at the 10th percentile of the distribution had a ratio of securities to assets of 6. 9 percent, while, for a bank at the 90th percentile, the ratio was almost six times higher, at 40. 7 percent. 7 one interpretation of this heterogeneity is as follows : while lending is obviously very important for a majority of banks, it need not be the case that a bank ’ s scale is pinned down by the nature of its lending opportunities. rather, at least in some cases, it seems that a bank ’ s size is determined by its deposit franchise, and that, taking these deposits as given, its problem then becomes one of how best to invest them. again, this liability - centric perspective is very different from how we are used to thinking about nonfinancial firms, whose scale is almost always presumed to be driven by its opportunities on the asset side of the balance sheet. the third stylized fact, illustrated in figure 1, is the one that i found most eye - opening : while banks might be quite heterogeneous in their mix of loans and securities, within the category of securities, they appear to have well - defined preferences. as can be seen in the figure, banks hold very little in the way of treasury securities and securities issued directly by the government - sponsored agencies : these two categories accounted for just 7. 7 percent and 5. 8 percent of total securities holdings, respectively, on

markets before legal confirmation illustrate the critical role of trust. even when followed to the letter, laws guide only a few of the day - to - day decisions required of business and financial managers. the rest are governed by whatever personal code of values that market participants bring to the table. commerce is inhibited if we cannot trust the reliability of counterparties ’ information and commitments. indeed, the willingness to rely on the word of a stranger is integral to any sophisticated economy. this necessary condition for commerce was particularly evident in freewheeling nineteenth - century america, where reputation and trust became valued assets. throughout much of that century, laissezfaire reigned in the united states as elsewhere, and caveat emptor was the prevailing prescription for guarding against wide - open trading practices. a reputation for honest dealing was thus particularly valued. even those inclined to be less than scrupulous in their private dealings had to adhere to a more ethical standard in their market transactions, or they risked being driven out of business. to be sure, the history of world business is strewn with fisks, goulds, and numerous others treading on, or over, the edge of legality. but they were a distinct minority. if the situation had been otherwise, nineteenth - century market economies would never have achieved so high a standard of living. over the past half - century, societies have embraced the protections of the myriad initiatives that have partially substituted government financial guarantees and implied certifications of integrity for business reputation. as a consequence, the value of trust so prominent in the nineteenth century seemed by the 1990s to be less necessary. most analysts believe that the world is better off as a consequence of these governmental protections. but recent corporate scandals in the united states and elsewhere have clearly shown that the plethora of laws of the past century have not eliminated the less - savory side of human behavior. we should not be surprised then to see a re - emergence in recent years of the value placed by markets on trust and personal reputation in business practice. after the revelations of corporate malfeasance, the market punished the stock prices of those corporations whose behaviors had cast doubt on the reliability of their reputations. there is no better antidote for business and financial transgression. corporate scandals and evidence of fraud and malfeasance notwithstanding, the history of ever - rising standards of living in a world fearful of violence is extraordinary testimony to the resilience of free peoples engaged in commerce. as president eisenhower opined