Abstract

American banks have spent the past decade shifting away from relationship banking toward product strategies based on high turnover. They have invested heavily in information technology and embraced an unstable, part-time labor force as a means of reducing costs. In the process, they moved away from many of their traditional sources of competitive advantage and encouraged customers in both the retail and wholesale banking segments to turn to other financial providers and other financial instruments to meet their banking needs. Banking institutions in Germany, in contrast, have been able to maintain a stable share of that country's financial services market by investing in the human resources and organizational capabilities necessary to pursue business strategies based on relationship banking. American depository institutions can realize the benefits of relationship banking if they commit themselves to creating stronger internal labor markets and reducing employee turnover.