A sustainable business model for commercial banks: An empirical study of APEC banks : A thesis submitted in partial fulfilment of the requirements for the Degree of Doctor of Philosophy at Lincoln University

Abstract

Sustainable banking is a topic that has recently attracted the increasing interest of researchers, practitioners, consultants, non-governmental organisations, social bodies and policymakers. This attraction has grown intensively since 1987 when the United Nations officially defined the sustainability concept. It is evident that sustainable business models for banks and sustainable bank performance are two dominant areas in the current sustainable banking research. However, the results of such studies are diverse. For example, there is no consensus on banks' main dimensions of a sustainable business model. More importantly, how bank regulations, such as the Net Stable Funding Ratio (NSFR), affect sustainability performance is still debatable and subject to future research. This study endeavours to partly fill the gap of the dearth of sustainable banking literature by examining banks in the Asia-Pacific Economic Cooperation (APEC) countries. First, we propose a new sustainable business model for the banking sector based on a comprehensive sustainable banking literature review and analyse the operational content of two banks, Triodos and Westpac, as role models in sustainable banking practice. The proposed model called TIMESe comprises six dimensions: technological, institutional, management, economic, social and environmental. We use the TIMESe model to explore the sustainable banking practices of banks in APEC countries. This includes measuring, ranking and tracking the sustainability performance and investigating the impact of the new regulations from the Basel Committee, the NSFR, on bank sustainability performance. Using the TOPSIS method, we measure and rank the sustainability performance of 81 banks in 17 APEC countries from 2015 to 2020. The Bank Sustainability Index (BSI) is used to complete this objective. The index based on the TIMESe model comprises 28 quantitative indicators. The application of the BSI indicator in this study differs from sustainability indexes in previous research because we use the industry standard value as the threshold to conduct sustainability tests to check whether banks are sustainable; almost 56% of our sample banks are unsustainable. Next, we use the Relative Comparison Indicator (RCI) to track the sustainability standing of banks over time. The RCI identifies a bank’s sustainability level as stable, high, or low. From this RCI status, a bank can decide which sustainability policy to apply to maintain or improve its future sustainability performance. Finally, we investigate the impact of the NSFR on bank sustainability performance by exploring data from 40 banks in 11 APEC countries from 2018-2020. The results show that NSFR significantly improved the sustainability performance of 82.5% of the sample banks, especially the 100% sustainable banks. Thus, we recommend applying the NSFR for a more resilient banking system nationally, regionally and globally. This study applies the TIMESe model, the BSI, the sustainability test, the sustainable threshold and the RCI for sustainable banking management practice. These concepts and their applications can be reference points for other production and services industries.