Determinants of banks performance before and after the financial crisis of 2007-2009: a study of global systemically important banks in the United Kingdom
The financial crisis of 2007/09 almost brought the global financial system to a standstill. The crisis not only resulted in the collapse of multiple banks, it also led to serious recession within Europe and the United Kingdom (UK), causing wide scale unemployment in all sectors. Following the crisis, governments and policy makers were empowered to push for financial reforms aimed at providing better transparency and reducing risks to make financial systems more stable and to make global markets safer. Between 2010 and now, there have been waves of financial reforms. In an attempt to examine the impact of the financial crisis and the attendant regulations, this study investigates the determinants of banking performance of global systemically important banks (G-SIBs) operating in the UK. The research takes a broader approach than previous studies, adopting an explanatory, sequential mixed methods research design. The study applied a panel data regression technique in analysing a dataset of 30 G-SIBs operating in the UK covering a 20 years period, followed by an in-depth interviews with banking practitioners.
The findings of the study indicate that the impact of specific variables – bank size, capital adequacy, deposit growth, financial leverage and risk weighted asset – on banks’ performance differ between the period before and after the financial crisis. However, the impact of credit risk and management efficiency on performance was found to be the same in both periods.
Two newly introduced capital requirement regulations (CRR) ratios, Basel III leverage ratio and liquidity coverage ratio, were also used to gauge the impact of regulations on the performance of G-SIBs and both returned a negative and significant relationship with performance. The research findings are consistent with earlier studies that argued that given liquidity represents banks’ abilities to meet withdrawal requests, higher liquidity and leverage ratios are detrimental to bank performance and lower ratios are critical to improving performance. However, as the new regulations are still in the early stages of implementation, further research on this area is suggested.
History
Institution
Anglia Ruskin UniversityFile version
- Published version
Thesis name
- Professional Doctorate
Thesis type
- Doctoral