What are the main factors for the subdued profitability of significant banks in the Banking Union, and is the ECB’s supervisory response conclusive and exhaustive? : A critical assessment of the 2018 SSM report on bank profitability and business models
- In this paper we argue that the own findings of the SSM THEMATIC REVIEW ON PROFITABILITY AND BUSINESS MODEL and the academic literature on bank profitability do not provide support for the business model approach of supervisory guidance. We discuss in the paper several reasons why the regulator should stay away from intervening in management practices. We conclude that by taking the role of a coach instead of a referee, the supervisor generates a hazard for financial stability.
