However, there was a trend before the crisis, among the biggest European banking institutions, to strengthen their focus on investment banking, including trading operations, and to increase wholesale funding to the point of excess. Part of this trend was driven by the growing demand by non-financial firms for risk management services.
With more freedom to choose their business models, banks sought for economies of scale and scope and strived to take advantage of diversification benefits from multiple sources of income. Commercial banking moved increasingly away from customer relationship-based banking where loans are granted and then held until maturity to the “originate and distribute” model where granted loans are pooled, then securitized and sold to investors.