Office of Financial Research
Institutional Affiliation: U.S. Department of the Treasury
NBER Working Papers and Publications
|August 2017||The Complexity of Bank Holding Companies: A Topological Approach|
with Dror Y. Kenett, Robin L. Lumsdaine, Jonathan K. Simon: w23755
Large bank holding companies (BHCs) are structured into intricate ownership hierarchies involving hundreds or even thousands of legal entities. Each subsidiary in these hierarchies has its own legal form, assets, liabilities, managerial goals, and supervisory authorities. In the event of BHC default or insolvency, regulators may need to resolve the BHC and its constituent entities. Each entity individually will require some mix of cash infusion, outside purchase, consolidation with other subsidiaries, legal guarantees, and outright dissolution. The subsidiaries are not resolved in isolation, of course, but in the context of resolving the consolidated BHC at the top of the hierarchy. The number, diversity, and distribution of subsidiaries within the hierarchy can therefore significantly e...