The Dynamics of Bank Business Models in the ASEAN Banking Sector

Prior to the global financial crisis in 2007/2008, the bank business model was moving away from traditional intermediation-based to more complex and sophisticated model such as trading and derivatives activities. This migration is believed to have played a significant role in the onset of the global crisis. Afterward, banks shift back to the traditional business model again.
The dynamics changes of bank business models attract researcher to make further investigation regarding this behavior. However, most of the studies were conducted in the context of developed countries and limited attention has been given to the banking sectors in emerging countries. Therefore, this thesis focuses on the empirical investigation of the business models evolution in the banking sectors in ASEAN country members as a representation of the emerging markets.
The evolution of bank business models is evaluated by examining the determinants of bank business model transformations which consists of external and internal factors. Chapter three evaluates bank market power and chapter four investigates banking regulation, in which both factors represent external determinants that might affect bank business model transitions. Meanwhile, Chapter five examines the internal factors by using cost minimization objective of the banks as a measure. In addition to the drivers of bank business models evolution, we also investigate the relationship between bank business models and banking performance as well as banking risk in Chapter three and five.
All in all, our findings suggest that bank business models in the ASEAN region evolve throughout time, indeed. We find strong evidence that external and internal factors affect the business model of the banks to a significant degree. However, our evidence shows the intermediation-based model as the bank business model equilibrium. In regard to the effect of business models on bank stability and performance, we reveal that stronger banks intermediate less and turn to alternative sources of business in order to enhance their financial situation, both from the performance and the stability sides.