The Business Models of Large Interconnected Banks and the Lessons of the Financial Crisis

Blundell‐Wignall, Adrian; Atkinson, Paul; Roulet, Caroline

doi:10.1177/002795011222100114

Cited by 13 publications

(6 citation statements)

References 10 publications

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“…The global banking landscape was changed after the financial crisis 2007 (Blundell-Wignall et al, 2012;Granville, 2014;Panitch & Gindin, 2014). Although unethical practices give short term benefits, but in the long term, it affects the relationships and in turn the business (Mantel, 2005) The financial crisis 2007 was partly due to conventional banks inefficiencies.…”

Section: Literature Reviewmentioning

confidence: 99%

Is Ethical Banking the Future? A Literature Review

Jayasekera

Pushpakumari

2021

ICBM

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Banks are one of the main contributors of economic growth. Whilst carrying their role as a catalyst of economic growth, banks may cause indirect damage to the environment and neglect part of the society. In the process they evade themselves from the socio- environmental responsibilities. In search of sustainable development through banking requires a new form of banking. The alternative source of banking has emerged to address these issues of environmental and societal sustainability. The new criteria for a knowledgeable shareholder/customer planning for investments/relationships with a bank would be the objective of the bank for environmental and societal sustainability. Banks are moving from profit centered banking to socio-environment centered banking. The ultimate objective is to achieve not only economic gains but societal and environmental gains as well. Hence; a form of banking based on values emerged and are called Ethical Banks. These banks promote ethical and responsible behaviors among their stakeholders. Ethical Banks like any other conventional Bank engages in whole gamut of banking operations. It operates with more transparency. Ethical Banking has many sustainable criteria, Responsible Investments, Values based Banking, Financial Inclusion, Environmental Sustainability and Sustainable Economic Gains. Ethical Banking is gaining popularity especially among the western part of the world. As the world is heading towards sustainability, Ethical banking is the most suitable banking model for the future. The subject of Ethical Banking is new to this part of the world. Therefore, many researches on this subject were done in the western world. Very few researches are available in Asian context. The purpose of this paper is to examine whether Ethical banking would be the future of banking through a literature review. The study is a desk research in the form of a literature review based on literature published between 1989-2019. The significance of the study is to find out whether Ethical Banking could contribute to socio-environmentally sustainable growth as the future of banking. Based on the literature reviewed, it can be concluded that Ethical banking could be the future of Baking for a sustainable world. Keywords: Ethical Banking, Value Based Banking, Financial Inclusion, Sustainable Development Environmental Sustainability

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Section: Literature Reviewmentioning

confidence: 99%

Is Ethical Banking the Future? A Literature Review

Jayasekera

Pushpakumari

2021

ICBM

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“…Resecuritization led to the emergence of an additional market for securities from securitization, thus increasing the complexity of financial instruments. This process was followed by credit rating inflation (Blundell-Wignall, et al, 2012). For example, investors rated mezzanine tranches of financial instruments created on the basis of subprime mortgages as too risky in relation to the yield they brought, and resecuritization transformed them into instruments that received the AAA rating (Wilmarth, 2009).…”

Section: Global Financial Crisis and Reviewing The Role Of Credit Ratmentioning

confidence: 99%

The Role of Audit and Credit Rating Agencies in the Assessment of Company Creditworthiness With Special Focus on Banks

2019

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Audit and credit rating agencies have a significant responsibility in assessing company creditworthiness and giving opinions on the client’s ability to continue business in the future, most often the next fiscal year. Responsibility is even greater when it comes to banks and their creditworthiness. The financial crisis of 2007 and the bankruptcy of a number of banks and other financial institutions imposed a need to seek accountability for the “delayed” reaction of regulatory bodies and significant fiscal consequences of the crisis. The aim of the paper is to evaluate the efficiency of credit rating agencies and external audit in assessing the creditworthiness of companies and banks, not for the purpose of finding their individual responsibilities, but to look at possible coordinated and joint actions to prevent future crisis events.

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“…He argued that banks had collectively migrated to business models that prioritized the production and trading of risk (through securitization and off‐balance sheet instruments), leveraged proprietary trading, market making, and global management of asset and liabilities. More politicized still, the Organisation for Economic Co‐operation and Development's Adrian Blundell‐Wignall, Wehinger, and Slovik () and Blundell‐Wignall, Atkinson, and Roulet () observed how Citigroup, Bank of America, UBS, Barclays, and Deutsche Bank had become too big to fail through tax (havens) arbitrage and aggressive lobbying. Drawing on Shin (), Janet Yellen (), of the U.S. Federal Reserve, noted that networks of mutual exposures became increasingly complex because banks could only grow by trading with each other.…”

Section: Shifting Ideas About Systemic Interconnectednessmentioning

confidence: 99%

The IMF's Rethink of Global Banks: Critical in Theory, Orthodox in Practice

Gabor

2014

Governance

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The International Monetary Fund's (IMF) new financial interconnectedness agenda, developed in response to postcrisis calls from G20 to better understand systemic financial institutions, deploys a critical approach that stresses the spatial, political, and institutional dimensions of cross‐border financial networks. It portrays global banks as key nodes in those networks, “super‐spreaders” of systemic risk through complex business models that involve yield search, regulatory and tax arbitrage. Yet this critical view does not translate into its policy advice at country level. In regular surveillance of developing countries, the IMF remains committed to a benign view of transnational banking, even when confronted with growing cross‐border fragilities. During crises of cross‐border banking, the IMF tailors its conditionality to minimize domestic regulatory challenges to cross‐border banking models and to propose crisis measures that create new profit opportunities for transnational banks.

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The Business Models of Large Interconnected Banks and the Lessons of the Financial Crisis

Cited by 13 publications

References 10 publications

Is Ethical Banking the Future? A Literature Review

Is Ethical Banking the Future? A Literature Review

The Role of Audit and Credit Rating Agencies in the Assessment of Company Creditworthiness With Special Focus on Banks

The IMF's Rethink of Global Banks: Critical in Theory, Orthodox in Practice

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