Conclusions

This book reviews the reasons and the process, describes the datasets, and exposes the methodology, computations and analysis used to develop the BBM analysis framework. It explains the relevance of this new framework for financial stability assessment and future of regulation and resolution. It provides an overview on the evolving role of banks in the financial system—with a focus on why banks changed their business model over the past decades and how the literature explained it using the diversification benefits from the assets and liability sides. It proposes a novel definition of a bank business model emphasising the activities on the asset side and the funding on the liability side. This new definition provides a holistic view as to how a bank behaves in the market while transforming its funding (retail, market or mixed) into retail, market or both financing and investment opportunities. The definition allows comparability between countries and all types of banks including the credit unions. It identifies the business models banks for comprehensive large datasets of banks and credit unions (when data is available) in Europe, US and Canada using the clustering methodology that is a simple statistical technique for assigning a set of observations into distinct group. It explains how the business models analysis could form part of the financial stability assessment framework and serve as a policy tool in terms of prevention, remedy and resolution. The business model assessment framework was performed and included the following: how business models interact with the other traditional metrics such as size and ownership and organisational structure, the determinants of business models migration and contribution to systemic risk, how business models contribute to financial and economic performance, how they increase and manage risks, and how they respond to regulation and resolution.