Evolution in Bank Complexity

Forthcoming Version of Evolution in Bank Complexity

Economic Policy Review, Volume 20, Number 2

42 Pages Posted: 7 Apr 2014

See all articles by Nicola Cetorelli

Nicola Cetorelli

Federal Reserve Bank of New York

James McAndrews

Wharton Financial Institutions Center

James Traina

University of Chicago

Date Written: March 31, 2014

Abstract

The authors present an analytical framework for bank complexity through the hypothesis that complexity is necessary for banks to stay viable in the evolving industry of financial intermediation. They look at organizational structures of bank holding companies gauged by the number and types of subsidiaries. Using comprehensive data on U.S. financial acquisitions over the past thirty years, the authors track consolidation and diversification that led to a significant expansion in bank complexity. They find that banks (and even nonbank financial firms) have gradually expanded into nontraditional banking through acquisitions of already‐formed subsidiaries. They also find that bank holding companies expanded by adding banks to their firm in the early 1990s. Their results are consistent with this move toward a model of finance oriented toward securitization.

Keywords: organizational complexity, financial intermediation

JEL Classification: G20, G21, L21, L22

Suggested Citation

Cetorelli, Nicola and McAndrews, James and Traina, James, Evolution in Bank Complexity (March 31, 2014). Forthcoming Version of Evolution in Bank Complexity, Economic Policy Review, Volume 20, Number 2, Available at SSRN: https://ssrn.com/abstract=2421367

Nicola Cetorelli (Contact Author)

Federal Reserve Bank of New York ( email )

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HOME PAGE: http://nyfedeconomists.org/cetorelli/

James McAndrews

Wharton Financial Institutions Center ( email )

2306 Steinberg Hall-Dietrich Hall
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Philadelphia, PA 19104
United States
9176090086 (Phone)
19104 (Fax)

James Traina

University of Chicago ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

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