The rise and fall of universal banking: ups and downs of a sample of large and complex financial institutions since the late ‘90s
AbstractWe document the development of the major international banks since the late nineties, analysing balance sheet data for 27 large and complex financial institutions. We argue that balance sheet expansion and business line diversification paved the way to the rise of the universal banking model. This model, apparently sound and efficient in the run-up to the crisis, showed all its shortcomings when the crisis erupted. European banks highlighted greater fragilities in their business models. Moreover the changed financial and regulatory landscape that followed has challenged this model further. Many proposed remedies to the global financial crisis appear to push for a return of a narrower model for banking activity. The first evidence we detected through a set of panel regressions shows that the proposed remedies are likely to change the profitability and riskiness profile of the banking industry, pushing towards a safer, although less profitable, business model. Moreover, the contemporaneous effort by banks to move in this direction is likely to strengthen this shift.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 42494.
Date of creation: Oct 2012
Date of revision:
banks; banking crises; financial crises; balance sheets;
Other versions of this item:
- Sergio MASCIANTONIO & Andrea TISENO, 2013. "THE RISE AND FALL OF UNIVERSAL BANKING: UPS AND DOWNS OF A SAMPLE OF LARGE AND COMPLEX FINANCIAL INSTITUTIONS SINCE THE LATE '90s," Journal of Advanced Studies in Finance, ASERS Publishing, vol. 0(1), pages 5-31, July.
- Sergio Masciantonio & Andrea Tiseno, 2013. "The rise and fall of universal banking: ups and downs of a sample of large and complex financial institutions since the late ‘90s," Questioni di Economia e Finanza (Occasional Papers) 164, Bank of Italy, Economic Research and International Relations Area.
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G01 - Financial Economics - - General - - - Financial Crises
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-11-17 (All new papers)
- NEP-BAN-2012-11-17 (Banking)
- NEP-CFN-2012-11-17 (Corporate Finance)
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