Bank Business Models at Zero Interest Rates

Tinbergen Institute Discussion Paper 16-066/IV

56 Pages Posted: 30 Aug 2016

See all articles by Andre Lucas

Andre Lucas

Vrije Universiteit Amsterdam; Tinbergen Institute

Julia Schaumburg

Tinbergen Institute; VU University Amsterdam

Bernd Schwaab

European Central Bank (ECB) - Directorate General Research

Date Written: August 9, 2016

Abstract

We propose a novel observation-driven dynamic finite mixture model for the study of banking data.

The model accommodates time-varying component means and covariance matrices, normal and Student's t distributed mixtures, and economic determinants of time-varying parameters. Monte Carlo experiments suggest that units of interest can be classified reliably into distinct components in a variety of settings. In an empirical study of 208 European banks between 2008Q1-2015Q4, we identify six business model components and discuss how these adjust to post-crisis financial developments.

Specifically, bank business models adapt to changes in the yield curve.

Keywords: bank business models, clustering, finite mixture model, score-driven model, low interest rates

JEL Classification: C33, G21

Suggested Citation

Lucas, Andre and Schaumburg, Julia and Schaumburg, Julia and Schwaab, Bernd, Bank Business Models at Zero Interest Rates (August 9, 2016). Tinbergen Institute Discussion Paper 16-066/IV, Available at SSRN: https://ssrn.com/abstract=2831922 or http://dx.doi.org/10.2139/ssrn.2831922

Andre Lucas (Contact Author)

Vrije Universiteit Amsterdam ( email )

SBE/EDS, De Boelelaan 1105
Amsterdam, 1081 HV
Netherlands
+31 20 598 6039 (Phone)
+31 20 598 6020 (Fax)

HOME PAGE: http://personal.vu.nl/a.lucas

Tinbergen Institute

Roetersstraat 31
Amsterdam, 1018 WB
Netherlands

HOME PAGE: http://www.tinbergen.nl

Julia Schaumburg

VU University Amsterdam ( email )

De Boelelaan 1105
Amsterdam, ND North Holland 1081 HV
Netherlands
+31 (0)20 59 82653 (Phone)

HOME PAGE: http://juliaschaumburg.com

Tinbergen Institute ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

HOME PAGE: http://juliaschaumburg.com

Bernd Schwaab

European Central Bank (ECB) - Directorate General Research ( email )

Kaiserstrasse 29
D-60311 Frankfurt am Main
Germany

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
76
Abstract Views
1,065
Rank
567,904
PlumX Metrics