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The North and South American banking sector has come under scrutiny by an independent academic research body, with the publication of in-depth and geographically widespread analyses of the banking system with a focus on cooperative banks and credit unions.
In the aftermath of the 2007-2009 financial crash and ensuing economic crisis, three new publications on the banking business models are the first detailed analyses of its kind, covering the United States, Canada and Brazil.
The research was led by Rym Ayadi, director of the Alphonse and Dorimène Desjardins International Institute for Cooperative, founder and director of the International Research Centre on Cooperative Finance and professor at the Department of International Business at HEC Montreal, in Montreal, Canada.
Referring to the combined US, Canadian and Brazilian sample, Ayadi says: “Overall, these findings give a first indication that a diverse system, as assessed using banking business models, is seemingly more resilient than a system that tends to converge towards one business model.”
Ayadi’s work follows the publication in January 2016 of the Banking Business Models Monitor 2015, tackling the European banking sector, which she also directed.
This latest research was carried out against a backdrop of unprecedented upheaval in the global banking system. Decades of deregulation, the damaging 2007-2009 global financial crises, including the collapse of Lehman Brothers in 2008 and the subsequent regulatory overhaul worldwide aimed to safeguard financial stability and put an end to government bailouts.
Ayadi’s investigation aims to provide the banking industry as a whole – including market professionals, depositors, creditors, regulators and supervisors - with a useful tool to better understand the nature of risk attached to various banking business models and their contribution to systemic risk throughout the economic cycle.
In commentary titled “Diversity of the banking sector revisited:Why does it matter post-financial crisis?" published in September 2015, Ayadi wrote:
“While many voices amongst academics and policy makers have called for a return to more traditional approaches to banking and finance and to more stringent financial regulation, very little attention has been given to diversity. Diversity in general and particularly in banking, involves the co‐existence of different agendas, with their varying objectives, ownership structures and business models.
“Similar to biodiversity, the value of diversity is more than the sum of its parts, which pre-supposes the co‐existence of diverse and competing elements that may serve the same purpose, only differently. Ultimately, however, in the long run the sum may prove to be more beneficial to the economy and wider society.”
Last week, Ayadi shared highlights from her findings at the International Summit of Cooperatives in Quebec.
