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

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Listed author(s):
  • 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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Paper provided by European Central Bank in its series Working Paper Series with number 1394.

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Date of creation: Nov 2011
Handle: RePEc:ecb:ecbwps:20111394
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Keywords: Bank Regulation; bank risk; Basle III; business models; financial crisis;

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Find related papers by JEL classification:
  • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
  • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
  • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
  • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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