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 ↩
A credit union is one of the purest forms of cooperative banking, striving to balance both economic and social goals for the benefit of its membership.
Credit unions are a prevalent part of society and have long been seen as a stable and risk-averse form of banking. In Canada, credit unions compete directly for market share with shareholder-owned banks, and dominate in some regions. Overall this heterogeneous banking system has been perceived to be relatively stable, especially since the recent financial crisis.
This research project aims to provide key insights into the dynamic contribution financial cooperatives make to the overall stability of a banking system. Focusing on the Canadian banking system, the analysis aims to assess key credit union characteristics that influence stability in a banking sector in periods of crisis and calm. The projects’ empirical design has four paradigms; business model heterogeneity; structural performance; survival, and viability.
This research project is part of my work as a Senior research associate of the International Research Centre for Cooperative Finance in HEC Montreal.
Regulatory reform in Irish credit unions is a hot topic. A recent Irish times article 1 highlights the juxtaposition of opinions of the various stakeholders in Ireland.
In this research project we investigate the existence of a tiered structure in Irish credit unions. We let the data speak and provide some empirical evidence to help inform this current policy debate.
So far our findings conclude that a multi-tier system in terms of business model complexity is present. This findings is based on a novel approach which endogenously identified an optimal tiered business model strategy based on key financial viability characteristics of Irish credit unions.
For more details of this work see http://www.barryquinn.com/a-sustainable-business-model-strategy-for-irish-credit-unions/
- “Credit unions criticise ‘overzealous’ regulatory plans”-http://www.irishtimes.com/business/financial-services/credit-unions-criticise-overzealous-regulatory-plans-1.2443451″ ↩
In collaboration with Ronan Gallagher (University of Edinburgh) I am investigating how financial fair play regulation (henceforth FFP) affects the relative performance of top flight professional football teams in Europe. Using panel data from on the top two Tiers of English Football, we will use multi-dimensional benchmarking techniques to capture the heterogeneous nature of professional football teams and then retrospectively assess how FFP affect their relative performance. Our goal is to shed light on the potential opportunity cost of such financial regulation in professional sport team management.
This project is in collaborating with Sami Ben Naceur (International Monetary Fund Institute), Rym Ayadi(Centre for European Policy Research) and Barbara Casu (Cass Business School). Using an international sample of commercial banks and Basel Core Principles compliance data (henceforth BCP) supplied by the IMF a non-parametric efficiency analysis applied using modern econometric techniques investigates whether compliance with these BCPs is associated with bank operating efficiency. This project will produce two pieces of work. In the first instance a peer-reviewed IMF working paper will be produced by September 2014. In the second instance a peer-review academic paper will be produced that will target a journal of international standing.
Abstract from IMF working paper
The recent crisis underscored the importance of regulation and supervision that promotes a well-functioning banking system that channels efficiently financial resources into investments, In this paper, we contribute to the on-going policy debate by assessing whether compliance with international regulatory standard and protocols enchances bank operating efficiency. We focus specifically on the adoption of international capital standards and the Basel Core Principles for Effective Bank Supervision (BCP). Using an international sample of publicly listed banks the relationship between bank efficiency and regulatory compliance is investigated using the (Simar and Wilson 2007) double bootstrapping approach.