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Changing Role of Banks in the Financial System

In: Banking Business Models

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  • Rym Ayadi

    (City University of London)

Abstract

Several decades prior to the Great Financial Crisis (GFC), the structural features of banking and finance evolved, producing major changes on how banks and other financial institutions operate in the financial system domestically and worldwide. The traditional role of banks in the economy evolved from the traditional intermediation approach to a one-stop shop approach, in which banks offer a wide range of financial services, enhanced by a widespread wave of financial innovations. Banks and financial markets became more closely linked and integrated. More recently, financial technology (the so-called Fintech) has created further disruptive forces and new risks in the financial industry that are yet to be explored in the upcoming decades. This chapter exposes the evolving traditional role of banks, which embraced the “financialisation” trend, leading to a fundamental transformation of their original business models. Is also provides a literature review on the explanatory factors of this process of transformation, in particular the reasons why banks chose to diversify their activities and funding strategies.

Suggested Citation

  • Rym Ayadi, 2019. "Changing Role of Banks in the Financial System," Palgrave Macmillan Studies in Banking and Financial Institutions, in: Banking Business Models, chapter 0, pages 5-20, Palgrave Macmillan.
    • Handle: RePEc:pal:pmschp:978-3-030-02248-8_2
    DOI: 10.1007/978-3-030-02248-8_2
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