Is Size Everything?

Bank Complexity, Governance, and Risk

“…We show that living will regulation reduced organizational complexity, raised liquidity risks, and reduced systemic risks. This analysis is consistent with the evolution of market's view of sources of systemic risk, from an exclusive focus on size prior to the crisis, to post-crisis additional consideration of complexity and interconnectedness (Antill and Sarkar, 2018).…”

Internationalization, foreign complexity and systemic risk: Evidence from European banks

“…Accordingly, we hypothesize that banks gain economies of scale and scope from their size, thus, the effect of complexity might differ by size (Bhagat et al, 2015;Antill and Sarkar, 2018). For that, we combine the insights from Barth and Schnabel (2013), Bertay et al (2013) and Bhagat et al (2015), as well as the European Central Bank criteria 25 , and focus on two proxies of size: size per se (i.e., parent bank' absolute total assets) and relative size (i.e., parent bank's market share in the total assets of the domestic banking industry).…”

“…Along the way, banks grew substantially in their organizational complexity, incorporating complex networks of foreign affiliates across variety of business types (see, e.g., Dell'Ariccia and Marquez, 2010;Berger et al, 2017;Goldberg and Meehl, 2019). 2 The global financial crisis has triggered specifically analytical works on the role of too-big-to-fail (TBTF) entities in contributing to systemic disruptions and systemic implications of complexity notably of systemically important financial institutions-SIFIs 3 (Gandhi and Lustig, 2015;Traina, 2018, Antill andSarkar, 2018). In this paper, we investigate whether complex corporate structure of European banks operating foreign affiliates (around the world) affects systemic risk and stability during normal times and distress times.…”

“…Second, foreign presence (expansion or retrenchment) might be impeded or enhanced in banking industry given its unique features (Allen et al, 2011;IMF, 2015). Third, the market's view of the determinants of systemic risk has evolved from an exclusive focus on bank size and interconnectedness prior to the crisis, to viewing bank complexity as key concern acute and post-crisis (Antill and Sarkar, 2018;Chernobai et al, 2020). Furthermore, the sound period saw a large increase in cross-border activities Milesi-Ferretti, 2001, 2007;IMF, 2015), increasing diversification gains and risk sharing.…”