New comprehensive Monitor places European Banking Business Models under spotlight

Montreal (ots/PRNewswire) -

The European Banking sector has come under scrutiny with the
publication of an in-depth continent-wide analysis by the
International Research Centre on Cooperative Finance
(http://financecoop.hec.ca/en/) (IRCCF) at HEC Montreal. The Banking
Business Models (BBM) Monitor 2015 Europe, which is launched today at
the European Parliament in Brussels, assesses banking sector
structure in light of the changing economic, legislative and
supervisory environment since the 2007-2009 financial crash and
ensuing economic crisis.

The detailed findings provide new evidence about many key areas of
European banking: interaction between business models and ownership
structures, internationalisation, migration, financial performance
and operational efficiency, contribution to the real economy, risk as
well as the response to regulation and supervision.

Overall, the results showed that a diverse banking system was more
resilient than a system that tended to converge towards one business
model. "The case of Belgium is revealing," said the Monitor. "Before
the crisis, the investment bank business model was dominant. At the
onset of the financial crisis, the banking system would have
virtually collapsed should it not have been for a massive government
intervention."

It warned that investment banks in France, Switzerland and the
United Kingdom were also on the watch-list to prevent dealing with
cases similar to Belgium.

The Monitor findings also shed light on the continuing
misalignment of regulatory indicators, in particular the risk-weights
and the Tier-1 capital ratio, to the underlying risks of European
banks.

Moreover, it seemed that market perceptions were more aligned to
the viewpoints of regulators, rather than to the intrinsic risk
quality of the bank.

Continued monitoring of bank business models is essential to
improve the understanding of this concept and, ultimately, to detect
the accumulation of risk at a system level. "It seems that in each
business model, there are worse and better performing cases,
depending on the overall macro and micro economic conditions in which
banks are operating. Further research is being conducted, based on
this monitor sample, definition and analytical framework, in order to
shed light on the characteristics of the best performing banks within
each business model, to which worse performing banks should converge
in the long run," the BBM outlined.

Looking ahead, the authors express that the business model
analysis can provide regulators and supervisors with essential
predictive power for detecting excessive risk accumulation at a
system level over a period of time - especially when external shocks
were simulated, such as a change of monetary policy in Europe and an
increase in interest rates. "Our prediction is bank business models
would respond differently to this shock and some might be more
resilient than others," BBM stated.

The Monitor concluded that transparency and public disclosure
practices, which were largely comparable across business models and
included many smaller banks, remained an important concern.

The Monitor was led and co-authored by Rym Ayadi
(http://www.hec.ca/en/profs/rym.ayadi.html), Professor at HEC
Montreal's Department of International Business and also Director of
the International Research Centre on Cooperative Finance (IRCCF),
together with Willem Pieter De Groen, Associate Researcher at the
IRCCF and Research Fellow at the Financial Institutions and
Prudential Policy Unit (FIPP) at the Centre for European Policy
Studies (CEPS).

BBM Monitor 2015 for Europe is the first comprehensive report
produced by the International Research Centre on Cooperative Finance
(IRCCF) at HEC Montreal. The renowned international business school
ultimately aims to develop a Global Monitor of banks' and credit
unions' business models. Moreover, Ayadi and her team aim to repeat
this same monitoring exercise annually, to allow for a better
understanding of the evolving business models of banks and their
implications.

For more information, please click here (http://financecoop.hec.ca
/wp-content/uploads/2016/01/Banking-Business-Models-Monitor-Europe-20
151.pdf). Please note that Ms. Ayadi is available for interviews.

About the IRCCF

The IRCCF (http://financecoop.hec.ca/en/) is an initiative of the
Alphonse and Dorimène Desjardins International Institute for
Cooperatives (http://institutcoop.hec.ca/en/) at HEC Montréal
(http://www.hec.ca/en/). It aims to develop independent academic and
policy research and targeted analysis adapted to different regions of
the world to promote sustainable and inclusive financial systems with
a particular emphasis on the role of cooperative finance.

For further press enquiries, please contact:

Rym Ayadi, Professor of international banking and financial
systems and Director of IRCCF, HEC Montréal rym.ayadi@hec.ca

ots Originaltext: HEC Montreal
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