We study the effects of a bank's engagement in trading. Traditional banking is relationship-based: not scalable, long …-based: scalable, shortterm, capital constrained, and with the ability to generate risk from concentrated positions. When a bank … inefficiencies. A bank may allocate too much capital to trading ex-post, compromising the incentives to build relationships ex …

banking system. We test for the likelihood that an extreme shock affecting a major, systemic U.K. bank would also affect …, bank soundness appears more susceptible to common (macro and market) shocks when the global environment is turbulent; this …