Email this article 
Hide
Show all
Has the Stabilizing Nature of Deposits Changed after the Crisis? Impact of Funding Structure on Bank’s Risk
Abstract
Theoretical background: The global financial crisis (GFC) has shown the importance of the funding model for the bank’s stability. In this context, deposits were of particular importance as they proved to be a stable source of funding during market turmoil. As a result, many banks have changed the funding model, paying greater attention to financing obtained on the deposits market.
Purpose of the article: In this paper, we analyze the impact of funding models on the EU banks’ risk after GFC, i.e. in 2011–2018. We put particular emphasis on the funding structure measured by the deposits to total assets ratio and changes that take place according to the type of institution (i.e. listing status, specialization, and funding model).
Research methods: In our research, we use panel data models together with a set of tests that allow us to deduce about properties of proposed models and allow us to analyze the significance of the impact of the bank-specific, macroeconomic, and dummy variables on the bank’s risk. We apply “within”, “fixed time effects” estimator from plm R package.
Main findings: We confirm the stabilizing function of deposits, but also the non-linear nature of the impact of the funding structure on the bank’s stability, depending on the bank’s specialization. This means that the stabilizing role of deposits for the bank’s stability is just as important in the post-crisis period as it was during the outbreak of GFC in 2008, although the excessive growth of deposits in some types of banks may, however, lead to an increase in the risk level.
Keywords
Full Text:
PDFReferences
Acharya, V.V., Gale, D., & Yorulmazer, T. (2011). Rollover risk and market freezes. The Journal of Finance, 66(4), 1177–1209. doi:10.1111/j.1540-6261.2011.01669.x
Ali, M., & Puah, C.H. (2018). Does bank size and funding risk effect banks’ stability? A lesson from Pakistan. Global Business Review, 19(5), 1166–1186. doi:10.1177/0972150918788745
Altunbas, Y., Manganelli, S., & Marques-Ibanez, D. (2011). Bank Risk During the Financial Crisis – Do Business Models Matter? (vol. 1394, ECB Working Paper Series). Frankfurt: European Central Bank.
Ayadi, R., & De Groen, W. (2014). Banking Business Models Monitor 2014: Europe (vol. 9713, CEPS Papers). Centre for European Policy Studies.
Ayadi, R., Arbak, E., & De Groen, W. (2012). Regulation of European Banks and Business Models: Towards a New Paradigm? Centre for European Policy Studies.
Balcerzak, A., Kliestik, T., Streimikiene, D., & Smrčka, L. (2017). Non-parametric approach to measuring the efficiency of banking sectors in European Union countries. Acta Polytechnica Hungarica, 14, 51–70. doi:10.12700/APH.14.7.2017.7.4
Baltagi, B.H. (2013). Econometric Analysis of Panel Data (5th ed.). Chichester: John Wiley & Sons.
Baselga-Pascual, L., Trujillo-Ponce, A., & Cardone-Riportella, C. (2015). Factors influencing bank risk in Europe: Evidence from the financial crisis. North American Journal of Economics and Finance, 35, 138–166.
Beltratti, A., & Stulz, R.M. (2012). The credit crisis around the globe: Why did some banks perform better? Journal of Financial Economics, 105(1), 1–17. doi:10.1016/j.jfineco.2011.12.005
Berger, A.N., Klapper, L.F., & Turk-Ariss, R. (2009). Bank competition and financial stability. Journal of Financial Services Research, 35(2), 99–118. doi:10.1007/s10693-008-0050-7
Boyd, J.H., & Runkle, D.E. (1993). Size and performance of banking firms. Journal of Monetary Economics, 31(1), 47–67. doi:10.1016/0304-3932(93)90016-9
Buch, C., & Dages, G.(2018). Structural changes in banking after the crisis. Committee on the Global Financial System Papers. 60. Bank for International Settlements.
Calomiris, C., & Kahn, C. (1991). The role of demandable debt in structuring optimal banking arrangements. The American Economic Review, 81(3), 497–513. Retrieved from http://www.jstor.org/stable/2006515
Chaffai, M., & Dietsch, M. (2015). Modelling and measuring business risk and the resiliency of retail banks. Journal of Financial Stability, 16, 173–182. doi:10.1016/j.jfs.2014.08.004
Croissant, Y., & Millo, G. (2008). Panel data econometrics in R: the plm Package. Journal of Statistical Software, 27(2), 1–43. doi:10.18637/jss.v027.i02
Demirgüç-Kunt, A., & Huizinga, H. (2010). Bank activity and funding strategies: The impact on risk and returns. Journal of Financial Economics, 98(3), 626–650. doi:10.1016/j.jfineco.2010.06.004
Deyoung, R., & Torna, G. (2013). Nontraditional banking activities and bank failures during the financial crisis. Journal of Financial Intermediation, 22(3), 397–421. doi:10.1016/j.jfi.2013.01.001
Foos, D., Norden, L., & Weber, M. (2010). Loan growth and riskiness of banks. Journal of Banking & Finance, 34(12), 2929–2940. doi:10.1016/j.jbankfin.2010.06.007
Galletta, S., & Mazzù S. (2019). Liquidity risk drivers and bank business models. Risks, 7(3), 89. doi:10.3390/risks7030089
Hahm, J., Shin, H.S., & Shin, K. (2013). Noncore bank liabilities and financial vulnerability. Journal of Money, Credit and Banking, 45(S1), 3–36. doi:10.1111/jmcb.12035
Hart, O., & Zingales, L. 2011. A new capital regulation for large financial institutions. American Law and Economics Review, 13(2), 453–490. doi:10.1093/aler/ahr/ahr001
Huang, R., & Ratnovski, L. (2009). Why are Canadian banks more resilient? IMF Working Papers, 09(134), 1. doi:10.5089/9781451872996.001
Huang, R., & Ratnovski, L. (2011). The dark side of bank wholesale funding. Journal of Financial Intermediation, 20(2), 248–263. doi:10.1016/j.jfi.2010.06.003
Kocisova, K., Gavurova, B., & Behun, M. (2018). The evaluation of stability of Czech and Slovak banks. Oeconomia Copernicana, 9(2), 205–223. doi:10.24136/oc.2018.011
Kozak, S. (2020). Are larger banks more efficient in the central eastern European countries? Annales Universitatis Mariae Curie-Skłodowska, sectio H – Oeconomia, 54(2), 31–40. doi:10.17951/h.2020.54.2.31-40
Köhler, M. (2015). Which banks are more risky? The impact of business models on bank stability. Journal of Financial Stability, 16, 195–212. doi:10.1016/j.jfs.2014.02.005
Laeven, L., & Majnoni, G. (2003). Loan loss provisioning and economic slow-downs: Too much, too late? Journal of Financial Intermediation, 12(2), 178–197. doi:10.1016/s1042-9573(03)00016-0
Maudos, J. (2017). Income structure, profitability and risk in the European banking sector: The impact of the crisis. Research in International Business and Finance, 39, 85–101. doi:10.1016/j.ribaf.2016.07.034
Martel, M.A., van Rixtel & González Mota, E. (2012). Business models of international banks in the wake of the 2007–2009 global financial crisis. Estabilidad Financiera, 22.
Mergaerts, F., & Vennet, R.V. (2016). Business models and bank performance: A long-term perspective. Journal of Financial Stability, 22, 57–75. doi:10.1016/j.jfs.2015.12.002
Norden, L., & Weber, M. (2010). Funding modes of German banks: Structural changes and their implications. Journal of Financial Services Research, 38(2–3), 69–93. doi:10.1007/s10693-010-0084-5
Oordt, M., & Zhou, C. (2019). Systemic risk and bank business models. Journal of Applied Econometrics, 34(3), 365–384. doi:10.1002/jae.2666
Roengpitya, R., Tarashev, N., & Tsatsaronis, K. (2014). Bank business models. BIS Quarterly Review.
Sysoyeva, L. (2020). Financial stability of the banking sector in European countries: A comparative analysis. Panoeconomicus, 67(4), 491–508. doi:10.2298/pan170601021s
Vazquez, F., & Federico, P. (2015). Bank funding structures and risk: Evidence from the global financial crisis. Journal of Banking & Finance, 61, 1–14. doi:10.1016/j.jbankfin.2015.08.023
DOI: http://dx.doi.org/10.17951/h.2022.56.5.185-205
Date of publication: 2023-04-19 10:27:42
Date of submission: 2022-10-01 11:52:11
Statistics
Indicators
Refbacks
- There are currently no refbacks.
Copyright (c) 2023 Marta Penczar, Lech Kujawski, Monika Liszewska
This work is licensed under a Creative Commons Attribution 4.0 International License.