The Complexity of Bank Holding Companies: A Topological Approach

Flood, Mark D.; Kenett, Dror Y.; Lumsdaine, Robin L.; Simon, Jonathan

doi:10.1016/j.jbankfin.2020.105789

Cited by 14 publications

(9 citation statements)

References 29 publications

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“…Some of the externalities generated by complexity are intended to be internalized by the new capital surcharges or the introduction of additional capital regulations aimed at pricing the cost of risks due to complex structures. Banks transformed their organizational structure to minimize the impact of regulatory costs (Flood et al 2020).…”

Section: The Role Of Banking Regulationmentioning

confidence: 99%

Complexity and riskiness of banking organizations: Evidence from the International Banking Research Network

Buch

2022

Journal of Banking & Finance

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Section: The Role Of Banking Regulationmentioning

confidence: 99%

Complexity and riskiness of banking organizations: Evidence from the International Banking Research Network

Buch

2022

Journal of Banking & Finance

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“…An implicit underlying premise was that traditional banking activities are safer or more socially valuable than non-traditional ones, which may not always be true. The proposals were also 32 See Flood et al (2017) for an approach to the complexity of bank holding companies based on the complexity of their corporate structures, and Cetorelli and Goldberg (2016) for a discussion of the impact of complexity on the management of banks.…”

Section: Bank Structural Reformmentioning

confidence: 99%

Regulatory Complexity and the Quest for Robust Regulation

Gai

Kemp²,

Serrano³

et al. 2019

SSRN Journal

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comprehensive understanding of correlations and interlinkages, as well as an understanding of macroeconomic feedback mechanisms. 6.Information availability: regulatory information should allow for prompt identification of contagion channels and pockets of vulnerability. Timely information enables policies to be implemented that react effectively to new developments, either by recalibrating or activating existing regulatory tools or by activating crisis management tools. 7.Non-regulatory discipline: the presence of regulatory discipline should not entail the removal of non-regulatory discipline. On the contrary, the discipline that derives from market players, effective governance structures and the prevalence of high ethical and personal responsibility standards in the management of financial institutions is complementary to financial regulation and may reduce its need to rely on complex rules.Reports of the Advisory Scientific Committee No 8 / June 2019 Introduction 5Arguably, these institutions contribute to harmonising regulatory and supervisory policies and practices in the EU, thus reducing the complexity associated with the heterogeneity in country legislations and practices. In practice, however, some of the new institutions have not wholly replaced the old ones, creating a more complex institutional landscape.

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“…This novel analysis contributes to three important literatures. First, we contribute to the significant advances are being made in measuring BHC complexity (Cetorelli and Goldberg 2014, Cetorelli and Goldberg 2016, Flood et al 2020, Carmassi and Herring 2016, Barth and Wihlborg 2017, and Goldberg and Meehl 2020. Most of these studies utilize information on legal entities within BHCs, working primarily with counts of entities and some information about industry type and geographic location.…”

Section: Introductionmentioning

confidence: 99%

“…Most of these studies utilize information on legal entities within BHCs, working primarily with counts of entities and some information about industry type and geographic location. Flood et al (2020) use network concepts that group entities in the BHC through which communication and coordination is relatively easy. Our contributions toward measurement of complexity stem from also using principle component analysis to extract key features from a range of distinct measures of business and geographic complexity.…”

Section: Introductionmentioning

confidence: 99%

“…The literature directly related to complexity includes documenting how the lengthy bankruptcy process and complexity of Lehman Brothers slowed resolution and magnified costs (Fleming and Sarkar, 2014). Some banks may have transformed their organizational structure to minimize the impact of regulatory costs (Flood et al, 2020). However, BHCs also may have used a variety of legal entities, such as Asset Backed Commercial Paper vehicles, to arbitrage regulations and increase risk-taking (Gong, Huizinga and Laeven, 2018).…”

Section: Introductionmentioning

confidence: 99%

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Bank Complexity, Governance, and Risk

Correa

2020

SSRN Journal

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Bank holding companies (BHCs) can be complex organizations, conducting multiple lines of business through many distinct legal entities and across a range of geographies. While such complexity raises the the costs of bank resolution when organizations fail, the effect of complexity on BHCs' broader risk profiles is less well understood. Business, organizational, and geographic complexity can engender explicit trade-offs between the agency problems that increase risk and the diversification, liquidity management, and synergy improvements that reduce risk. The outcomes of such trade-offs may depend on bank governance arrangements. We test these conjectures using data on large U.S. BHCs for the 1996-2018 period. Organizational complexity and geographic scope tend to provide diversification gains and reduce idiosyncratic and liquidity risks while also increasing BHCs' exposure to systematic and systemic risks. Regulatory changes focused on organizational complexity have significantly reduced this type of complexity, leading to a decrease in systemic risk and an increase in liquidity risk among BHCs. While bank governance structures have, in some cases, significantly affected the buildup of BHC complexity, better governance arrangements have not moderated the effects of complexity on risk outcomes.

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The Complexity of Bank Holding Companies: A Topological Approach

Cited by 14 publications

References 29 publications

Complexity and riskiness of banking organizations: Evidence from the International Banking Research Network

Complexity and riskiness of banking organizations: Evidence from the International Banking Research Network

Regulatory Complexity and the Quest for Robust Regulation

Bank Complexity, Governance, and Risk

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