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Defining a Business Model in Banks

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Banking Business Models

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Abstract

The business model is multi-faceted and a complex concept. It is a relatively new concept and is ill defined in banks but is widely used by scholars and policy analysts when assessing these institutions. This chapter proposes a definition of a bank business model: the A/F—Activity/Funding definition.

First, it provides an overview on the business model concept and a bank in the literature. Second, it exposes the definition proposed by the author of what a business model is in banks and other similar institutions.

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Notes

  1. 1.

    Total derivative exposures are defined as the summation of positive and negative fair values of all derivative transactions, including interest, currency, equity, OTC, hedge and trading derivatives.

  2. 2.

    Accounting terminology uses a narrower definition of trading assets and would exclude securities/loans available for sale. The point of our clustering is to separate business models, so that 20% in “our trading assets” may fit as a non-trading bank and, since we are letting the data speak for itself, it might be 50% in “our trading assets” that makes banks a “wheeler-and-dealer” heavy trader type.

  3. 3.

    Trading securities are securities that are held to be sold in the near future.

  4. 4.

    For credit unions, the notional value has been used as the instrument for the clustering.

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Authors and Affiliations

  1. CASS Business School, City University of London, London, UK

    Rym Ayadi

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  1. Rym Ayadi
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Correspondence to Rym Ayadi .

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Ayadi, R. (2019). Defining a Business Model in Banks. In: Banking Business Models. Palgrave Macmillan Studies in Banking and Financial Institutions. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-02248-8_3

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  • DOI: https://doi.org/10.1007/978-3-030-02248-8_3

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  • Publisher Name: Palgrave Macmillan, Cham

  • Print ISBN: 978-3-030-02247-1

  • Online ISBN: 978-3-030-02248-8

  • eBook Packages: Economics and FinanceEconomics and Finance (R0)

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