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Bank Complexity and Risk

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  • Elizaveta Kamaraeva

    (International College of Economics and Finance, National Research University Higher School of Economics)

Abstract

The consolidation of banks into banking groups and holdings has been a prominent recent trend in Russia's banking sector. To evaluate the effect of consolidation on the risk of a banking group, one needs a specific metric that captures organisational, business, and geographic complexity. In this paper, I consider different complexity types and proxies, and examine how complexity affects the risk of a banking group. Using data for 76 banking groups in Russia for 2015-2019, I find that for most of the complexity indicators there is a positive relationship between the organisational and business complexity on the one hand, and the risk of a banking group on the other hand. I also show that, in combination, different types of complexity have a positive effect on risk.

Suggested Citation

  • Elizaveta Kamaraeva, 2020. "Bank Complexity and Risk," Russian Journal of Money and Finance, Bank of Russia, vol. 79(3), pages 75-104, September.
    • Handle: RePEc:bkr:journl:v:79:y:2020:i:3:p:75-104
    DOI: 10.31477/rjmf.202003.75
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    More about this item

    Keywords

    bank complexity; risk taking; regulation; banking group; agency problem; diversification; Z-score;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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