Based on publicly available data we propose a simple taxonomy of the banks under the direct supervision of the ECB, taking into account their core business, size, and degree of internationalization. We compare the structures of the balance sheet and income statement of the eight different types of bank, and analyse their profitability between 2006 and 2013.
The majority of banks are lending-oriented, exposed to their domestic market, with high credit risk exposure to nonfinancial firms and retail clients. The ratio of risk-weighted assets to total assets differs significantly across bank types, even controlling for the composition of credit risk exposures; this heterogeneity mostly reflects country-specific riskiness and the extent to which banks in each category use their internal models to determine capital requirements.
Since 2010, the profitability of lending-oriented banks has declined more sharply than that of the other banks, reflecting both poorer macroeconomic conditions in countries where many of these banks are located, and a higher sensitivity of ROA to GDP growth.
