Blog entry by Thorsten Beck, January 26, 2022
Complexity of banks poses governance and regulatory challenges – the more complex, the harder to govern and monitor and the harder to supervise and resolve in case of failure. And especially global banks are mind-bogglingly complex, as first documented by Nicola Cetorelli and Linda Goldberg. But what are the implications of this complexity for performance and stability, both on the bank and the system level? And what drives complexity? The International Banking Research Network (IBRN), under the leadership of Claudia Buch and Linda Goldberg, used micro data and analytical advances to generate rich cross-country insights on the complexity and riskiness of banking organizations, with a selection of the consequent papers published in a recent special issue in the Journal of Banking and Finance and summarised in this article by Claudia and Linda. The special issue contains papers on banks in Colombia, Germany, Hong Kong, Italy, Norway and Spain, as well as a cross-country paper and a fascinating paper on the links between banks and shadow banking entities in Europe. The papers cover many different aspects of complexity, including geographic, organisational and business complexity.