A theoretical analysis of bank relationship

This paper analyses the banking relationship between branch manager and loan officer

of a bank branch using two theoretical approaches - Agency Theory and Trust Theory.

The analysis is performed across five dimensions of the business relationship between

branch manager and loan officer – supervisor subordinate relationship, delegation of

authority, assumption of risk in lending, goal congruence and mutual dependence. It is

concluded that Trust theory is better descriptor of the banking relationship between

branch manager and loan officer as compared to Agency theory because Trust theory

can explain situations involving multifaceted relationship such as one between branch

manager and loan officer using stakeholders perspective.