Structural Changes in Banking Industry after the 2008 Financial Crisis

Abstract

The 2008 financial crisis is an evolution phase of the financial market in the thorough financial deregulation procedure that started at the end of the 1970s. After that, the bank capital requirements of the US have been revised in various significant ways, the goal of which is to support the banking system and decrease the potential of another crisis. The notion is that banks change to follow the business model of securitization and embrace social corporate responsibility more rigorously. Given what happened during the crisis, the Basel II Accord has been criticized. This paper will analyze the changes in the internal management and supervision of banks from the perspective of Basel reform, and explore the causes of the financial crisis and the deficiency in bank governance. Apart from that, three areas of banking industry, including capital structure, assets management and administering of credit risk, are demonstrated. According to the results, the banks have raised capital requirements, increased bank liquidity, reduced bank leverage, constantly evolved and found new ways to keep adequate performance level. At the same time, corruption in bank lending is effectively controlled. This paper further discusses the post-crisis measures in the banking sector, and demonstrates that the regulators need to consider the banks’ expansion and the increase of their capital level.