Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 2016-08-29
Number: 16-066/IV
Author-Name: Andre Lucas
Author-Workplace-Name: VU University Amsterdam, the Netherlands
Author-Name: Julia Schaumburg
Author-Workplace-Name: VU University Amsterdam, the Netherlands
Author-Name: Bernd Schwaab
Author-Workplace-Name: European Central Bank, Germany
Title: Bank Business Models at Zero Interest Rates
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.
Classification-JEL: C33, G21
Keywords: bank business models, clustering; finite mixture model, score-driven model, low interest rates
File-Url: https://papers.tinbergen.nl/16066.pdf
File-Format: application/pdf
File-Size: 715769 bytes
Handle: RePEc:tin:wpaper:20160066