By Jacob Bikker, Jaap W.B. Bos
Economic literature will pay loads of awareness to the functionality of banks, expressed when it comes to festival, focus, potency, productiveness and profitability. This publication presents an all-embracing framework for a few of the current theories during this region and illustrates those theories with useful functions.
Evaluating a vast box of study, the e-book describes a revenue maximizing financial institution and demonstrates how numerous widely-used versions might be equipped into this framework. The authors additionally current an outline of the present significant developments in banking and relate them to the assumptions of every version, thereby laying off mild at the relevance, timeliness and shelf lifetime of some of the versions. the implications comprise a collection of strategies for a destiny study time table.
Offering a complete research of financial institution functionality, this publication comes in handy for all of these venture study, or have an interest, in components corresponding to banking, festival, supervision, financial coverage and monetary balance.
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Extra resources for Bank Performance: A Theoretical and Empirical Framework for the Analysis of Profitability, Competition and Efficiency
Given that this type of work is still in its infancy, we refrain from including it in our general framework. Instead, we rely on control variables that aim to proxy for banks’ risk-return preferences. A second consideration relating to banks’ proﬁt maximization concerns incentive structures. Even risk-neutral shareholders who are well diversiﬁed may have problems translating their claim on proﬁts into the actions required to maximize revenue and minimize costs. e. 4 As long as shareholders cannot monitor and penalize bank management, the latter may show expense-preference behavior or – if it is highly risk averse – any Basic model of bank performance 5 27 other strategy that reduces proﬁts.
Also, it provides for a risk-sensitive capital adequacy requirement for operational risk. Finally, the Supervisory Review of Pillar II requires banks to demonstrate that their capital is sufﬁcient to cover (all) risks, given their speciﬁc activities and environment, both under normal and stress conditions. The regulatory regimes evolve over time. g. on information technology, data collections and risk management theory, are stimuli to develop new risk management techniques and new regulatory regimes.
First, it wants its share of the growth of new customers [Cn ]. Second, it wants to retain as many of its old customers as possible [Cr ]. Third, it wants to win over other banks’ old customers [Co ]. 10 Also, let nio = the number of old customers for bank i. e. not behaving collusively) is given by the variance of the expected number of customers. The higher this variance, the more likely a bank is to show collusive behavior. 11c) No − ni0 ∗ (((1 − p) MSi ) ∗ (1 − (1 − p) MSi )) Market power models 37 As explained, an increase in market share (MS i ) leads to more collusive behavior if ∂var(·)/∂MSi > 0.
Bank Performance: A Theoretical and Empirical Framework for the Analysis of Profitability, Competition and Efficiency by Jacob Bikker, Jaap W.B. Bos