Need For New Business Model in Banks

Ingars ERINS, Jana ERINA


The aim of this article is to assess the existing business models used by the banks operating in Latvia and 18 largest banks operating in the EU in the time period from 2006 till 2011.

In order to obtain research results, the authors performed qualitative analysis of the scientific literature on bank business models, which have been grouped into clusters that consist of such components as: 1) capital and reserves; 2) assets; 3) deposits, and 4) loans.

In their turn, bank business models have been developed based on the types of core activities of the banks, and have been divided into four groups: Wholesale, Investment, Retail and Universal Banks. Descriptive statistics have been used to analyse the models, determining mean, minimal and maximal values of constituent cluster components, as well as standard deviation. The analysis of the data is based on such bank variable indices as Return on Assets (ROA) and Return on Equity (ROE).

Having conducted the research the authors have come to the conclusion that Retail Banks both in Latvian and the EU may face the need for a new business model in future. Meanwhile, Investment Banking is the most efficient existing bank business model in Latvia, and Universal Banking is most efficient in the EU.

The authors see it necessary to conduct assessment of bank business models in future considering not only on financial, but also social and environmental aspects.

The research conducted by the authors may be of practical significance for the banks analysed in the article while they review their future aims and plan their future business strategy.

Full Paper in PDF Document


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