Systemic risk and bank business models

Oordt, Maarten van; Zhou, Chen

doi:10.1002/jae.2666

Cited by 44 publications

(25 citation statements)

References 86 publications

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“…Since macroprudential tools are directed at banks and aimed at influencing bank behavior, we estimate bank systemic risk as the bank's contribution to systemic risk, using financial market information (see e.g. Billio et al, 2012, Huang et al, 2012, Acharya et al, 2017, van Oordt and Zhou, 2019and Adrian and Brunnermeier, 2016 for different approaches). The use of market data has several advantages compared to the use of accounting data or aggregate macro-economic variables.…”

Section: Introductionmentioning

confidence: 99%

“…Over the past years, the MES has received a lot of attention by academia and regulators and it has become one of the most commonly used metrics for systemic risk in the literature. Since we want to disentangle the effect on individual bank risk and the interlinkage component, we decompose the MES into two components, capturing the individual bank risk and the systemic linkage of the bank with the financial system, in line with van Oordt and Zhou (2019). This decomposition is of particular interest to answer our research question because macroprudential policy is aimed at tackling not only the risk profile of individual financial institutions but rather the correlations and common exposures across institutions (Borio, 2003).…”

Section: Introductionmentioning

confidence: 99%

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Macroprudential policy and bank systemic risk

Meuleman

Vennet

2020

Journal of Financial Stability

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This paper investigates the effectiveness of macroprudential policy to contain the systemic risk of European banks between 2000 and 2017. We use a new database (MaPPED) collected by experts at the ECB and national central banks with narrative information on a broad range of instruments which are tracked over their life cycle. Using a dynamic panel framework at a monthly frequency enables us to assess the impact of macroprudential tools and their design on the banks' systemic risk both in the short and the long run. We furthermore decompose the systemic risk measure in an individual bank risk component and a systemic linkage component. This is of particular interest because microprudential policy focuses on the tail risk of an individual bank while macroprudential policy targets systemic risk by addressing the interlinkages and common exposures across banks. On average, all banks benefit from macroprudential tools in terms of their individual risk. We find that credit growth tools and exposure limits exhibit the most pronounced downward effect on the individual risk component. However, we find evidence for a risk-shifting effect which is more pronounced for retail-oriented banks. The effects are heterogeneous across banks with respect to the systemic linkage component. Liquidity tools and measures aimed at increasing the resilience of banks decrease the systemic linkage of banks. However, these tools appear to be most effective for distressed banks. Our results have implications for the optimal design of macroprudential instruments.

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Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Macroprudential policy and bank systemic risk

Meuleman

Vennet

2020

Journal of Financial Stability

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“…First of all, the research is found on the literature on business models (Casadeus-Masanell and Ricart, 2007; Casadeus-Masanell and Ricart, 2010; Zott et al , 2010, Teece, 2010) and the banking business models empirical analysis (Altunbas et al , 2011; van Ewik and Arnold, 2013; van Oordt and Zhou, 2014; Ayadi and De Groen, 2014; Roengpitya et al , 2014; Curi et al , 2015; Kohler, 2015; Mergaerts and Vander Vennet, 2016). This literature is focused on a broad analysis of banking business models, both retail and investment banking-oriented, trying to understand “the set of key ratios that differentiate bank’s business profile” and “how bank changed their business models before and after the recent crisis” (Roengpitya et al , 2014).…”

Section: A Selected Literature Reviewmentioning

confidence: 99%

“…Some academic studies are already focused on the evolution of the banking business models and their impact on bank stability (Altunbas et al , 2011; van Ewik and Arnold, 2013; van Oordt and Zhou, 2014; Ayadi and De Groen, 2014; Roengpitya et al , 2014; Curi et al , 2015; Kohler, 2015; Mergaerts and Vander Vennet, 2016); we try to contribute to this literature, adopting another very specific perspective, zooming in on a single business area, i.e. the distribution of investment services, where banks and non-banks are competitors.…”

Section: Introductionmentioning

confidence: 99%

A European banking business models analysis: the investment services case

Tanzi

Aruanno²,

Suardi³

2018

JFRC

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Purpose-Business Model Analysis is acquiring increasing visibility in the European banking regulatory framework, following the European Banking Authority guidelines on common procedures and methodologies for the supervisory review and evaluation process (SREP), developed to assess business and strategic risks (EBA, 2014, 2015a, 2015b, 2015c). Starting from a selected literature review, in the paper, the authors analyse business models set up by financial intermediaries, bank and non-banks, for the distribution of investment services, first by comparing European niche players with European banking global players, and second, comparing European niche players among themselves to understand the evolution of business models for the distribution of investment services at European level. The research is supported by the Baffi-Carefin Research Centre at the Bocconi University (Italy), in collaboration with ANASF, the Italian Association of Financial Advisors (Italy).

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“…Van Oordt and Chen () decompose systemic risk into two subcomponents reflecting systemic linkage and tail risk. Their most important result is that different variables reflecting the characteristics of the banking business model have no effect on the risk of a single bank but may have significant effects on systemic risk.…”

Section: Introduction and Literature Reviewmentioning

confidence: 99%

How diverse are national banking systems? An analysis on banking business models, profitability, and riskiness

2019

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In this paper, we apply an algorithm developed by Martin Weitzman to quantify the extent of diversity among the business models of financial intermediaries at an international level. In particular, we investigate the relationship between the diversity of the business models of EU national banking systems and their profitability and riskiness. We show how Weitzman's approach can be generally applied to the issue at hand; as a by-product, the analysis allows us to assess whether the diversity among banking systems was affected by the imported systemic financial crises of 2007/8 as well as its domestic sequel centered on the sovereign debt crisis that occurred in 2010-12. The motivation for this paper is twofold. First, we provide an operational measure of the diversity of business models among banking sectors.Second, we enrich the economic literature relating to banking business models by providing a macro-founded analysis. To this end, we highlight the range of diversity of national banking business models correlated with high performances in terms of profitability and riskiness.

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Systemic risk and bank business models

Cited by 44 publications

References 86 publications

Macroprudential policy and bank systemic risk

Macroprudential policy and bank systemic risk

A European banking business models analysis: the investment services case

How diverse are national banking systems? An analysis on banking business models, profitability, and riskiness

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