Global Bank Business Models

Global banks have significantly changed their business models after the Global Financial Crisis, as a response to the regulatory changes as well as profitability pressures. I have researched on this topic for over two years, with the work being presented in GFSR October 2017 and senior management presentations. The major takeaways are below, with detailed empirical work on each topic.

• Global Banks Have Fortified Balance Sheets and Continue to Address Crisis Legacies (litigation costs; disposal of non-core assets; business restructuring)
• Global Banks Have Reduced Market-Related Business, but continue to operate internationally
• Subsidiarization Presents a Structural Challenge for Some Banks

I have also co-authored an IMF working paper proposing a new taxonomy of business model classification: based on four categories: 1) Line of business ; 2) Geographical reach; 3) Funding Mechanism and 4) degree of subsidiarization

Global Bank Profitability

While global banks have improved their capital and liquidity positions significantly, profitability remains elusive for a decent chunk of the system.

• European banks continue to lag on the profitability prospects (charts 2 and 3 below); This can be attributed to cyclical as well as structural factors (overbanking for instance). GFSR October 2016, GFSR April 2017
• I produce quarterly monitors on the performance of GSIBs across various parameters including profitability, balance sheet growth, asset quality, capital, liquidity and interconnectedness. (available upon request)

Interconnectedness and Spillovers b/w global banking sectors

• Financial Markets can help highlight the extent to which there are inward / outward spillovers in the asset prices (also indicating the investor reaction function). I deployed the methodology by Diebold Yilmaz to analyze the spillovers between the Global Systemically Important Banks. See: GFSR April 2018

• Global Financial sectors are also connected through direct balance sheet exposures - for instance through the interbank market. This exposes the banks to both credit and funding shocks. I deployed a multi-round default and sensitivity algorithm to assess the contagion and vulnerability of the global banking sectors. This was done with Euro Area as the protagonist, and published in the Euro Area FSAP, 2018 (with my colleague Mehmet).