Naslov
Bank Risk Profiles and Business Model Characteristics

Autori
Ercegovac, Roberto ; Pečarić, Mario ; Klinac, Ivica

Izvornik
Journal of central banking theory and practice (1800-9581) 9 (2020), 3; 107-121

Vrsta, podvrsta i kategorija rada
Radovi u časopisima, članak, znanstveni

Ključne riječi
bank risk, business model, bank assets structure

Sažetak
Current research, especially after the financial crisis, highlights different key determinants of high risk bank profiles. The main aim of this paper is to test, through an empirical model, the impact of various determinants of bank business models on the bank risk with the purpose of enabling early identification of signals of risk and timely application of prudential measures. There are two basic business models for banks: market- oriented wholesale bank business model and client-oriented bank business model. In the wholesale model, a significant share of the assets is comprised of securities in the trade portfolio, the bank is strongly involved in the international financial markets, while on the income side of the bank profile, a large part is related to non- interest income. In the client related business model, classical banking is dominant, which is visible in the high share of loan-related assets, a larger share of self-financing and a larger share of income from interest-operational income in the total income structure of the bank. In the panel analysis of the empirical data, as an indicator of the bank risk profile, the stock market price to stock market price volatility ratio was used with the presumption that the market price and its volatility, with sufficiently liquid shares listed on public stock exchanges, is representative of bank risk. The analysis is conducted on a homogenous example of 20 European banks in the period 2002-2017. Following the econometric analysis, the conclusion is that banks in which business model wholesale characteristics are dominant are more exposed to business risk in periods of market shocks and, as such, represent a danger for the long-term stability of the financial sector.

Izvorni jezik
Engleski

Znanstvena područja
Ekonomija

POVEZANOST RADA