European banks after the global financial crisis: Peak accumulated losses, twin crises and business models

This paper takes stock of European banks accumulated losses since 2007 and relates these to bank characteristics. In line with previous studies, we find that large, market-oriented banks were particularly hit by the 2007-2009 global financial crisis whereas smaller, retail-oriented banks weathered these years relatively well. In subsequent years, however, the picture reversed and retail-oriented banks were most affected. Over the entire period, medium-sized banks suffered most losses and often needed state aid. This suggests that measures to contain systemic risk, such as capital surcharges and bail-in requirements, are as relevant for these institutions as they are for the largest banks.
 
Keywords: Bank profitability, Business model, Financial crisis.
JEL classifications: G01, G21.

Working paper no. 600