Afterword: The Post-crisis Regulatory Regime and Bank Business Models

David T Llewellyn

Following the detailed aspects of regulation and supervision covered in this book, this concluding chapter will focus on a more general perspective about how the regulatory regime has changed fundamentally since the crisis, and the possible implications for bank business models. As there is a symbiotic relationship between regulation and bank business models (both reacting to each other), all of the topics considered in earlier chapters (risk analysis, stress testing, funding plans of banks, capital requirements, internal modelling, etc) are substantially affected by regulation. The context is that the few years since the onset of the crisis have seen one of the biggest-ever sets of changes to the global regulatory regime. Regulation has inevitably responded to the weaknesses in some aspects of banks’ business models that were revealed in the crisis, and which in turn reflected several structural changes in the global financial system in the decade prior to the onset of the crisis.

Our starting point is that the evolution of business models does not occur in a vacuum: their antecedents need to be considered. Several structural changes in the global financial system set the

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