Antonio Trujillo-Ponce

The current economic crisis has highlighted that a well-functioning financial system is significantly important for economic growth. The financial system enables an economy to be more productive as it allows investors with few resources to use savings from those with few prospects of investing. In this context, it is crucial to know what drives bank profitability and bank risk. According to previous studies, the factors determining the profitability and risk of banks fall into two main groups. First, there is a group of determinants of profitability that are specific to each bank and that, in many cases, are the direct result of managerial decisions. They include asset structure, asset quality, capitalization, financial structure, efficiency, size, and revenue diversification. The second group of determinants includes factors relating profitability and risk to the industry structure and to the macroeconomic environment within which the banking system operates, such as industry concentration, economic growth, inflation, and interest rates.

For more information, please see BANEF