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Bank risk during the financial crisis: do business models matter?

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  • Altunbas, Yener
  • Marqués-Ibáñez, David
  • Manganelli, Simone

Abstract

We exploit the 2007-2009 financial crisis to analyze how risk relates to bank business models. Institutions with higher risk exposure had less capital, larger size, greater reliance on short-term market funding, and aggressive credit growth. Business models related to significantly reduced bank risk were characterized by a strong deposit base and greater income diversification. The effect of business models is non-linear: it has a different impact on riskier banks. Finally, it is difficult to establish in real time whether greater stock market capitalization involves real value creation or the accumulation of latent risk. JEL Classification: G21, G15, E58, G32

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Bibliographic Info

Paper provided by European Central Bank in its series Working Paper Series with number 1394.

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Date of creation: Nov 2011
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Handle: RePEc:ecb:ecbwps:20111394

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Keywords: Bank Regulation; bank risk; Basle III; business models; financial crisis;

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Cited by:
  1. Wilko Bolt & David Humphrey, 2013. "Competition in bank-provided payment services," Working Papers 13-17, Federal Reserve Bank of Philadelphia.
  2. Michal Skorepa & Jakub Seidler, 2014. "Capital Buffers Based on Banks' Domestic Systemic Importance: Selected Issues," Research and Policy Notes 2014/01, Czech National Bank, Research Department.
  3. Altunbas, Yener & Gambacorta, Leonardo & Marques-Ibanez, David, 2012. "Do bank characteristics influence the effect of monetary policy on bank risk?," Economics Letters, Elsevier, vol. 117(1), pages 220-222.
  4. V. De Bruyckere & M. Gerhardt & G. Schepens & R. Vander Vennet, 2012. "Bank/sovereign risk spillovers in the European debt crisis," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 12/828, Ghent University, Faculty of Economics and Business Administration.
  5. Robert Ferstl & David Seres, 2012. "Clustering Austrian Banks’ Business Models and Peer Groups in the European Banking Sector," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 24, pages 79-95.
  6. Apergis, Nicholas, 2014. "The long-term role of non-traditional banking in profitability and risk profiles: Evidence from a panel of U.S. banking institutions," Journal of International Money and Finance, Elsevier, vol. 45(C), pages 61-73.
  7. Köhler, Matthias, 2013. "Does non-interest income make banks more risky? Retail- versus investment-oriented banks," Discussion Papers 17/2013, Deutsche Bundesbank, Research Centre.
  8. repec:ecb:ecbwps:20111427 is not listed on IDEAS
  9. De Bruyckere, Valerie & Gerhardt, Maria & Schepens, Glenn & Vander Vennet, Rudi, 2013. "Bank/sovereign risk spillovers in the European debt crisis," Journal of Banking & Finance, Elsevier, vol. 37(12), pages 4793-4809.
  10. Michael Brei & Blaise Gadanecz, 2012. "Have public bailouts made banks' loan books safer?," BIS Quarterly Review, Bank for International Settlements, September.
  11. Milne, Alistair, 2014. "Distance to default and the financial crisis," Journal of Financial Stability, Elsevier, vol. 12(C), pages 26-36.

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