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Basel 3: Does One Size Really Fit All Banks' Business Models?

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  • Giuliana Birindelli

    () (Department of Management and Business Administration, University of Chieti-Pescara, Italy)

  • Paola Ferretti

    () (Department of Economics and Management, University of Pisa, Italy)

  • Marco Savioli

    () (Department of Economics, University of Bologna, Italy; The Rimini Centre for Economic Analysis, Italy)

Abstract

Based on a sample of eurozone banks classified into six business models over the period 2001–2014, this paper aims to investigate whether and how strongly the Basel 3 requirements affect differently the stability of banks working under different business models. Our findings show that, irrespective of the business model, the most positive driver of banks' stability is the leverage ratio, followed by the net stable funding ratio. The interactions with banks' business models allow us to highlight significant differences in the coefficients of the Basel 3 variables. In particular, savings banks are predicted to gain the greatest advantage from our set of identified reform measures in banking prudential regulation; on the contrary, commercial and investment banks are the least advantaged. Thus, our findings stress the need to revise the current "one-size-fits-all" prudential framework.

Suggested Citation

  • Giuliana Birindelli & Paola Ferretti & Marco Savioli, 2016. "Basel 3: Does One Size Really Fit All Banks' Business Models?," Working Paper series 16-20, Rimini Centre for Economic Analysis.
  • Handle: RePEc:rim:rimwps:16-20
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    Keywords

    Basel 3; banks' business model; financial stability;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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