The Changing Structure of Banking Firms and Industry: an Analysis through the European Banks’ Balance Sheets.

Abstract

This paper analyzes the changing structure of the Italian and European banking firms and industry. The main aim is to identify the fundamental changes of the underlying economics of banking through the analysis of banks’ balance sheets. In this paper, we provide evidence that commercial banks have progressively moved from traditional banking to new forms of financial intermediation. The paper discusses the implications of this changes in terms of business models of banking firms, business operations of banks, structure of the financial system and banking industry. The research points out that the role of traditional bank is in decline. It is changing the fundamentals of banking business. Banks are losing their predominant role as deposit takers and lenders to firms. Substantial structural changes are facing the banking business, but not uniformly in the European banking industry. These changes have deep effects on the operation of banking firms, the structure and organization of banking firms, the structure of banking industry, the financial stability of banking firms and banking industry, and sustainability of emerging new banking business models.