Banking Business Models and the Extent of Financial Crisis

41 Pages Posted: 30 Jan 2015 Last revised: 1 May 2015

Aneta Hryckiewicz

Goethe University of Frankfurt; Kozminski University

Łukasz Kozłowski

Kozminski University

Date Written: May 1, 2015

Abstract

This study applies the k-medoids methodology and identifies various banking business models according to asset combinations and funding sources. The study determines the effects of these models on bank risk-return profiles. We use all systemically important banks listed on the V-LAB list from 2000 to 2007 in 65 countries to examine the effect of the banking business models’ characteristics on the mortgage crisis. Our results prove that the asset structure of banks was responsible for the systemic risk before the mortgage crisis, whereas the liability structure was responsible for the crisis itself. The results reveal why the banking sector’s risk was not obvious before the mortgage crisis. Finally, we show that countries whose banks rely on investment activities experienced a greater drop in GDP; however, the drop was short-lived compared to countries with a predominantly traditional banking sector.

Keywords: Bank risk, business model, bank regulation, financial crisis, banking stability, systemic risk

JEL Classification: G21, G15, E58, G32

Suggested Citation

Hryckiewicz, Aneta and Kozłowski, Łukasz, Banking Business Models and the Extent of Financial Crisis (May 1, 2015). Available at SSRN: https://ssrn.com/abstract=2557097 or http://dx.doi.org/10.2139/ssrn.2557097

Aneta Hryckiewicz (Contact Author)

Goethe University of Frankfurt ( email )

House of Finance, Grüneburgplatz 1
Frankfurt am Main, DE Hessen 60323
Germany

Kozminski University ( email )

Accounting Department
ul. Jagiellonska 57/59
Warsaw, 03-303
Poland
(22) 519 21 69 (Phone)

Łukasz Kozłowski

Kozminski University ( email )

ul. Jagiellońska 57/59
Warsaw, Mazowieckie 03-301
Poland

HOME PAGE: http://www.kozminski.edu.pl

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