A new approach to measuring universal banking

D'Avino, Carmela and Shabani, Mimoza (2017): A new approach to measuring universal banking.

Abstract

This paper proposes a novel measure of universal banking constructed using the relative contribution of each operating segment to total assets. Using a sample of international banks, we evaluate the extent to which our proposed metric affects banks’ profitability, stability, liquidity and capitalisation. In addition, we evaluate the implications of a more complex business model, featured by th interaction of universal banking and globalization. Results suggest that a higher degree of diversification enhances financial stability and capitalisation when the Universal Banking Index (UBI) is used as a proxy of universal banking. However, a more complex structure, conceived as the combination of universal and global business models, is associated with lower levels of capital and is less desirable from a financial stability perspective

• Item Type: MPRA Paper
• Language: English
• Keywords: Universal banking, financial products diversification, globalization
• Subjects: F - International Economics > F6 - Economic Impacts of Globalization > F65 - Finance; G - Financial Economics > G2 - Financial Institutions and Services > G20 - General; G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages; L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L22 - Firm Organization and Market Structure

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