The Financial Crisis And The Universal Banking Model

This study examines the universal banking model and the impact of the recent

financial crisis on the performance of universal banks. The main objective is to

assess if this particular model was more resilient than other ones when taking

into account the influence of the financial crisis. From empirical research, the

general belief is that the universal banking model is more resilient than

specialized models. This paper uses CAMELS model as an analytical

framework, where factors measuring a bank's performance are as follow:

capital adequacy, assets quality, management quality, liquidity and sensitivity

to market risk. Each of these variables is represented by a set of ratios,

comparable to an industry average. A sample of eight banks representing the 2

banking models is studied in which four banks belongs to the universal banks

category and four belongs the specialized category, in this case, investment

banks category. The investigation results show that universal banks'

performance during the financial crisis was superior to the investment banks'

sample performance, thereby confirming the resilience of universal banks to

the crisis.