This paper will argue that the business models of financialized banks (Engelen et al 2011) that are driven by return-on-equity value metric and risk algorithm of Basel capital adequacy rules have not fundamentally changed since the crisis and this is a major obstacle to creating a socially and economically useful banking that bank regulation at both national and supranational level aims to achieve. Bank business models have deepened the cross-border interconnectedness of banks in the eurozone before the sovereign debt crisis (Ertürk et al 2012). The European Central Bank had to intervene with massive liquidity injection to the eurozone banking from 2011 onwards to save the euro from the disorderly breakdown of cross-border bank interconnectedness in the eurozone (Ertürk et al 2012). The unconventional monetary policies of the European Central Bank, Federal Reserve and the Bank of England, however, have led to bank welfarism (Bowman et al 2013) and unintentionally support economically dysfunctional bank business models. Consequently banks benefit from quantitative easing but fail to convert cheap liquidity from central banks to growth generating credit to the businesses. This paper will propose that the debates on supranational and national bank regulation should address the causes and consequences of the universal aspects bank business models that prevent creation of an economically and socially useful banking system.
