Banking liquidity regulation: Impact on their business model and on entrepreneurial finance in Europe

• Author: Elisabeth Paulet
• Published date: 01 July 2018
• DOI: http://doi.org/10.1002/jsc.2206
• Date: 01 July 2018

RESEARCH ARTICLE

DOI: 10.1002/jsc.2206

Strategic Change. 2018;27(4):339–350. wileyonlinelibrary.com/journal/jsc © 2018 John Wiley & Sons, Ltd. 339

Abstract

anhin] lituidity re]ulaঞon has trans=ormed banhsĽ business model and hamrered entrerreneur-

ial Cnance by reducin] credit distribuঞon. I= caritaliaঞon and lituidity raঞo hae induced more

stability, they hae reduced the mar]in and rroCtability o= urorean Cnancial insঞtuঞons. $his

=act has inYuenced the Cnancin] o= enterrrises in ]eneral and small and medium sied enter-

rrises in rarঞcular. ence, Crms were obli]ed to Cnd other sources o= Cnancin] to undertahe

their rrojects and hae contributed to trans=ormin] the business model o= banhin] insঞtuঞons.

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Durin] the last internaঞonal Cnancial crisis, lituidity in short-term

money marhets dried ur. anhs su@ered seere rroblems accessin]

=undin] includin] secured =undin] =or hi]hly rated assets. asel III

intended to include, on one hand, =ar more e@ecঞe ways =or assess-

in] and limiঞn] the lituidity rishs which indiidual insঞtuঞons =ace,

and on the other hand, a beer understandin] o= marhet-wide lituidity

rishs. ence, banh carital has been considerably increased in order to

]uarantee banhin] stability. In addiঞon, the asel ommiee intro-

duced a Lituidity oera]e !aঞo (L!) whose aim is to increase the

resilience o= the banhin] system to lituidity shochs by retuirin] banhs

to hold a minimum o= i]h uality Lituid ssets consisঞn] o= cash,

central banh reseres and ]oernment bonds to coer net oulows o=

liabiliঞes under sreciCc stress scenarios.

oncerns hae been raised that the new re]ulatory rules will

chan]e the way banhs analye credit, rossibly reducin] the lendin]

acঞity $owards small- and medium-sied enterrrises (Ss). $his is

due to banhsĽ rotenঞal rercerঞon that Ss carry hi]her rish. uthors

lihe oro and &dell (2010), otu]no and on=erra (2012), Jimen࣐,

Steen, eydrॕ, and Jesিs (2012) document that credit surrly dur-

in] the crisis declined more at banhs ereriencin] Cnancial stress (low

leels o= etuity carital, roorly rer=ormin] loan rorolios) but declined

relaঞely less =or Ss with stron] banh-borrower relaঞonshirs.

Due to the scarcity o= demandin] lituidity re]ulaঞon be=ore the

last Cnancial crisis, =ew research arঞcles hae discussed the rrecise

imract o= re]ulaঞon on banhin] rroCtability and its imract on credit

distribuঞon =or Crms. oreoer, no ]enerally accerted rosiঞon eists

rerresenঞn] the imract o= this new re]ulaঞon on banhin] rer=or-

mance. inancial industry ]rours hae ar]ued that lituidity re]ulaঞon

will substanঞally increase the cost o= banh =undin] and dama]e the

real economy as banhs rass on hi]her costs and reduce credit sur-

rly to the real economy (II, 2011). Others hae ar]ued that lituidity

re]ulaঞon will hae a more limited imract (, 2010).

$he aim o= this arঞcle is there=ore to rroide eidence o= the new

re]ulaঞon on acঞiঞes o= banhin] insঞtuঞons. ore sreciCcally, we

intend to measure how the actual re]ulaঞon a@ects banhin] mar]in

and/or rroCtability.  discussion tahin] into account the more releant

rarameter to ealuate the imract o= the actual re]ulaঞon will helr to

]ie an insi]ht on how the new constraints could inYuence the core

business o= banhin] insঞtuঞons and its imract on ]lobal business

model o= banhs.

$he arঞcle is structured as =ollows. [er a literature reiew, we

rresent the dataset and the releant raঞos necessary to arrrehend

rer=ormance, lituidity rish, and stability =or banhin] insঞtuঞons. $he

emrirical models are rresented in Secঞon 3 and the discussion o= our

baseline results in Secঞons 4 and 5. Secঞon 6 concludes.

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Surrrisin]ly, the literature on banh rroCtability and its determinants

dates bach to the 1980s and 1990s =ollowin] the wae o= Cnancial

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I usiness School-!I, ancy,

France

orr;srom7;mc;

lisabeth aulet, I usiness School,

!FI, 86 rue du Ser]ent landan S

70148 ancy ede, France.

mail: elisabeth.rauletŠicn-artem.com

* JL classiCcaঞon codes: 01, 24, 15, 34, 44, 50

Strategic Change. 2018;27(4):339–350. wileyonlinelibrary.com/journal/jsc © 2018 John Wiley & Sons, Ltd. 339