Economics at your fingertips  

Financialization, bank business models and the limits of post-crisis bank regulation

Ismail Ertürk

Journal of Banking Regulation, 2016, vol. 17, issue 1-2, 60-72

Abstract: This article argues that major post-crisis regulatory initiatives like the Dodd-Frank Act, the Vickers Report, the Liikanen Review and Basel III capital adequacy and liquidity rules that are shaping the banking industry globally are not likely to be successful in de-risking the banks because they do not explicitly engage with the consequences of shareholder value-driven business models that drive management behaviour in banking. Banks operate in a financialized economy where firms compete in the stock market to deliver unrealistic returns to shareholders. The business models of such financialized banks re-locate risks according to conjunctural market and regulatory arbitrage conditions to achieve the unchallenged return targets and therefore thwart the ideal outcomes aimed at by regulatory initiatives. The section ‘Introduction: Post-crisis regulatory reform initiatives to de-risk and re-capitalise banks’ of this article will describe the de-risking and re-capitalisation measures that were introduced by the post-crisis regulatory initiatives in the United States and Europe. The section ‘Financialized bank business models’ will discuss bank business models in a financialised economy and how the post-crisis regulatory initiatives have failed to address the risks in banking that are associated with maximising shareholder value. The section ‘Post-crisis examples of relocated risks in shareholder value-driven banks’ will examine two post-crisis case studies where JP Morgan Chase and the UK retail banks like Lloyds Group, in pursuit of shareholder value creation, suffered losses from activities that the new regulatory initiatives have failed to identify and regulate.

Date: 2016
References: Add references at CitEc
Citations: Track citations by RSS feed

Downloads: (external link) Link to full text PDF (application/pdf) Link to full text HTML (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This journal article can be ordered from

Access Statistics for this article

Journal of Banking Regulation is currently edited by Dalvinder Singh

More articles in Journal of Banking Regulation from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla ().

Page updated 2019-11-06
Handle: RePEc:pal:jbkreg:v:17:y:2016:i:1-2:p:60-72