Altunbas, Yener Marqués-Ibáñez, David Manganelli, Simone
Year of Publication:
ECB Working Paper 1394
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.
Bank Regulation bank risk Basle III business models financial crisis