Business Model Assessment (BMA) is on the top of the agenda of regulators. The aim of this research is to examine the relationship between banks' business models and both viability and sustainability, as intended by the European Banking Authority (EBA) in 2014. Business models are identified with a cluster analysis based on assets and funding structure of banks' balance sheet as well as the income diversification. The sample of analysis is composed by the 30 Euro area banks listed on the Eurostoxx banks index. Policy implications are also commented.
JEL classification: G21, G32, L11
The topic is relevant since business models are and will be a key priority of banking authorities for years to come (ECB, 2016). Both the financial crisis and the new regulatory framework, which could be considered as an effect of the financial crisis, had big impacts on business models and their performance. Banks are also facing a "twin challenge" as Ignazio Angeloni (Member of the Supervisory Board of the ECB) said on 6 October: "Banks need to rethink their business models, assessing their sustainability in the current and prospective environment. Survival in a hostile environment requires adaptability [...]. Banks also need to develop alternative sources of income and contain costs. [...] We supervisors must monitor the adaptation of business models, gauging their sustainability, together with the banks. In the SSM we have made business models one of our supervisory priorities, and we plan to encourage discussion of this subject." (Ignazio Angeloni, European banks and the banking union, European American Economic Forum organised by Euronext and the European American Chamber of Commerce, New York, 7 June 2016).
Moreover, "Banks choose to be different from one another [...]. In a competitive pursuit of growth opportunities, banks choose a business model to leverage the strengths of their organisation." (Roengpitya, Rungporn, Nikola A. Tarashev, and Kostas Tsatsaronis. "Bank business models." BIS Quarterly Review December, 2014). We would expect a significant relationship between banks' business model and both sustainability and viability. Thus, relevant policy implication may be obtained, as for example the identification of a best practice of banks' business model assessment.
All these effects will be analysed under the supervision of Professor Marina Brogi.