A European banking business models analysis: the investment services case
| DOI | https://doi.org/10.1108/JFRC-04-2016-0028 |
| Pages | 35-57 |
| Date | 12 February 2018 |
| Published date | 12 February 2018 |
| Author | Paola Musile Tanzi,Elena Aruanno,Mattia Suardi |
| Subject Matter | Accounting & Finance,Financial risk/company failure,Financial compliance/regulation |
A European banking business
models analysis: the investment
services case
Paola Musile Tanzi
Department of Economics, University of Perugia and SDA Bocconi, Milan, Italy
Elena Aruanno
Valeur SA, Lugano, Switzerland, and
Mattia Suardi
ANASF, Milan, Italy
Abstract
Purpose –Business Model Analysis is acquiringincreasing visibility in the European banking regulatory
framework,following the European Banking Authority guidelineson common procedures and methodologies
for the supervisory review and evaluation process(SREP), developed to assess business and strategic risks
(EBA, 2014,2015a,2015b,2015c). Starting from a selected literature review,in the paper, the authors analyse
business models set up by financial intermediaries, bank and non-banks, for the distribution of investment
services, first by comparing European niche players with European banking global players, and second,
comparing Europeanniche players among themselves to understand the evolutionof business models for the
distribution of investment services at European level. The research is supported by the Baffi–Carefin
Research Centre at the Bocconi University (Italy), in collaboration with ANASF, the Italian Association of
FinancialAdvisors (Italy).
Design/methodology/approach –The authors consider a sample of European financial players from
2009 to 2014. The authors’focusis on France, Germany, Italy, The Netherlands,Spain and the UK; overall the
authors’handmade data set is basedon 162 annual reports. The authors follow two main questions: Do the
niche players, as they are focused on the distribution of investment services, have an upper limit to
profitability, compared to the global players, as risk-takers in many financial areas? How is the business
model of niche playerschanging, facing increasing competition and regulatorypressures?
Findings –Answering the first researchquestion, the highest net profitability is found in the niche players
group; the global players, as risk-takers, achieve lower remuneration, in contrast with the risk premium
theory. The resultswere assessed over a limited period, however,deemed in line with the company’s strategic
planning horizon. Answering the second research question, the authors focus on the case of niche players,
using a cluster analysis. The authorsidentify three different business models: most dynamic niche players,
which combine investment services, insurance and welfare services, achieving the highest margins and
The authors are grateful to ANASF, the Italian Association of Financial Advisors, for the precious
support (its President, Maurizio Bufiand the General Manager, Germana Martano). The authors are
also very grateful to the Baffi–Carefin Center of Bocconi University for the ongoing support and
Professor Carlo Altomonte for the ongoing encouragement. The authors also thank the participants
in the discussion held in September 2015 at the XXXVII General meeting of AIDEA, the Italian
Academy for Business Administration and Management, a special thanks to Professor Luciano
Munari and Professor Claudio Giannotti. The authors acknowledge the European Financial Planning
Association Scientific Committee Members, Germán Guevara and Professor Wolfgang Reittinger for
the useful information. The authors have benefited from helpful discussion with a CONSOB
(Commissione Nazionale per le Società e la Borsa) group of researchers, thanks to Nadia Linciano,
Head of Economic Studies. All errors are of the authors.
European
banking
business
models analysis
35
Received9 April 2016
Revised26 May 2016
12August 2016
Accepted18 December 2016
Journalof Financial Regulation
andCompliance
Vol.26 No. 1, 2018
pp. 35-57
© Emerald Publishing Limited
1358-1988
DOI 10.1108/JFRC-04-2016-0028
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1358-1988.htm
stability; players mainly focused on asset management, whose key vulnerability is the degree of open
architecture,especially in light of future MiFID 2 implementation; and players mainlyfocused on the creation
of well-structured on-line platforms,which offer also brokerage services, thereby reducing their marginality
and potentiallyincreasing their business risk.
Research limitations/implications –Despite the limited time series, the authors’researchgives some
inputs for those interested in deepening the businessmodel analysis focus on the distribution of investment
services and the business and strategic risk assessment, both for the global banks and the niche players
(banks and non-banks).
Practical implications –The authors’results couldbe of some interest during the strategicassessment
of global banksand niche players, both adopting an internal perspectiveor an external one, as regulator.
Social implications –By giving some specific insights into the assessmentand comparison of business
and strategic risks among global and niche players, the authors’research provides the basis for further
researchin the field of the distribution of investment services.
Originality/value –The originality mainly regardsthe business model risk perspective and the focus of
the authors’analysis:the distribution of investment services. This sector, unlike the asset management,does
not have an easily recognisablegroup of comparables at European level,all the European countries analysed
have very differentbusiness models. This research avails of an originaldatabase, that is unique to Europe.
Keywords Strategic risk, Business model risk, Distribution, Bank, Business model analysis,
Investment service, Investment firms, MiFID2, Wealth management
Paper type Research paper
1. Introduction
Business model analysis is acquiring increasing visibility not only in the literature on
business strategy (Casadeus-Masanell and Ricart, 2007;Casadeus-Masanell and Ricart,
2010;Zott et al.,2010;Teece, 2010), but also in the European financial regulatory framework,
following the European Banking Authority (EBA) guidelines and impact analysis (EBA,
2014,2015a,2015b, 2015c) and the priorities set by the European Central Bank in its 2016
supervisory plan (ECB,2016).
In literature, the “businessmodel”concept is defined as “the logic of the firm, the way the
company operates and how it creates value for its stakeholders”(Casadeus-Masanell and
Ricart, 2010).
The logic and the way in which the company operates are the reflection of the strategic
choices, and in our view, these results are ultimately visible in the company balance sheet.
This information acquires importance, if based on cross-temporal, cross-sector and cross-
country analyses,as we try to show in this work.
Some academic studies are already focused on the evolution of the banking business
models and their impact on bank stability(Altunbas et al., 2011;van Ewik and Arnold, 2013;
van Oordt and Zhou, 2014;Ayadi and De Groen, 2014;Roengpitya et al., 2014;Curi et al.,
2015;Kohler, 2015;Mergaerts and Vander Vennet, 2016); we try to contribute to this
literature, adopting anothervery specific perspective, zooming in on a single business area,
i.e. the distributionof investment services, where banks and non-banks are competitors.
The purpose of this paper is to analyse the evolution of businessmodels for the provision
of investment services in Europe, focusing our attention on the distribution side. The
distribution of investment services is a very heterogeneous, fee-based business area, where
banks of all size and non-banks are competing,in a changing regulatory frameworkfor both
banks and investment firms. To understand the real evolution and the business
sustainability, we must be able to overcome the traditional contraposition between banks
and non-banks, adopting a new perspective, based on the comparison between global and
niche players.
JFRC
26,1
36
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