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Journal of Financial Services Research

, Volume 49, Issue 2–3, pp 175–201 | Cite as

The Corporate Complexity of Global Systemically Important Banks

  • Jacopo Carmassi
  • Richard Herring
Article

Abstract

The financial crisis of 2007-2009 revealed that the corporate complexity of most of the Global Systemically Important Banks (G-SIBs) presented a formidable obstacle to any plausible orderly resolution of these institutions. This paper documents the extent of this complexity making use of an historical time series, developed by the authors, that shows the evolution of the number of majority-owned subsidiaries of G-SIBs over time. After a very significant increase in complexity before the crisis and until 2011, this trend may be reversing, possibly in response to regulatory and market pressures on banks since then. Nonetheless the reduction in complexity has been uneven across institutions and may not persist. The econometric analysis of this new set of panel data produces two key results with relevant policy implications: first, the relationship found in previous studies between the number of subsidiaries and bank size loses significance when time effects are introduced; second, large mergers and acquisitions are a key driver of complexity and their effect remains significant even when time effects are considered.

Keywords

Basel Committee Corporate complexity Corporate structure G-SIBs Cross-border resolution Resolution policy Financial Stability Board Systemic risk 

Notes

Acknowledgments

We are grateful to the Systemic Risk Council for support of this work although our results do not necessarily reflect its views or those of its members.

The authors are grateful to Nicola Cetorelli, David Mayes, Haluk Unal, an anonymous referee and participants at the IBEFA 2016 ASSA Session on Banking Risk and Complexity for comments on an earlier draft.

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Copyright information

© Springer Science+Business Media New York 2016

Authors and Affiliations

  1. 1.Department of Economics and Finance and CASMEF, Arcelli Center for Monetary and Financial StudiesUniversity LUISS Guido CarliRomeItaly
  2. 2.The Wharton SchoolUniversity of PennsylvaniaPhiladelphiaUSA

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