One of the many good things about working as a Finance lecturer at Queen’s Management School is the opportunity to research overseas. As a senior research associate of the International Research Centre for Cooperative Finance (IRCCF) at HEC Montreal, I have the pleasure of visiting this eclectic bilingual city each year. Over the academic year I have two visits as part of my sabbatical leave. The visits are centred around three exciting projects:
- Banking Business Model (BBM) diversity and financial sustainability.
- Cooperative Traits of Mergers.
- Systemic Risk and Basel Regulatory Compliance (in collaboration with the IMF and Cass Business School)
This research hopes to provide evidence that enlightens the following research puzzles:
- What business model features have engendered resilience in the Canadian financial system ?
- Do credit union mergers enshrine membership benefits?
- How does compliance with core supervisory standards set by the Basel Banking Supervision Committee affect systemic risk in developed economies?
Projects 1 and 2 are Canada focused while project 3 takes a global approach. Each of these projects pose very different quantitative challenges which I relish as an card-carrying empiricist.
In project 1 we are using a data clustering approach to identify distinct business models based on an institution’s funding and activities. This model-free approach reveals the BBM diversity in the Canadian sector over the period 2010-2015. Following the seminal work on BBM global monitors by my co-author Professor Rym Ayadi (Director of the IRCCF) in Ayadi et al (2011 2014, 2015 and 2016)1 this exercise will illustrate the unique architecture of the Canadian financial services industry and shed light on factors that promote resilience to globally systemic banking problems.
Project 2 uses a proprietary data set from Deposit Insurance Corporation of Ontario (DICO) to investigate 20 years of consolidation in this region’s credit unions. The analysis will use a flexible model which captures the uniquely cooperative objective of membership benefit maximisation. The project will empirically expose the cooperative traits of mergers/amalgamations in credit unions and hopes to reveal the nature of the membership value of such activity.
Finally, project 3 is a global exercise which uses a number of quantitative measures to capture systemic risk of a financial institution and identify to what extend regulatory compliance can mitigate this risk. This is a follow on piece of work from Ayadi et al (2016) 2. We have used a large slice of data science to compile a unique sample representing global banking and its regulatory infrastructure. Our key variable measures the compliance of a financial system with the principles of regulatory best practice proposed by the Basel Committee for Banking supervision.
In short I have my work cut out! Watch this space for some interesting preliminary results from these projects.
- Ayadi, R., Arbak, E. & Pieter De Groen, W., 2011. Business Models in European Banking: A Pre-and Post-Crisis Screening. Centre for European Policy Studies.
Ayadi, R. & DeGreon, W.P., 2014. Banking Business Models Monitor 2014 Europe. Centre for European Policy Studies.
Ayadi, R., Arbak, M. & GreonWP, D., 2015. Regulations of European Banks and Business Models: Towards a new paradigm.Centre for European Policy Studies.
Ayadi, R. & De Groen, W.P., 2016. Bank Business Model Monitor for Europe 2015. International Research Center for Cooperative Finance. ↩
- Ayadi, R., Naceur, S. B., Casu, B. & Quinn, B. 2016, Does Basel Compliance Matter for Bank Performance?, Journal of Financial Stability. 23, p. 15-32 ↩