U.S. Banks after the past Recession

Ten years after the financial crisis, we are experiencing the second longest economic expansion in the U.S. Fears of another recession are present, according to The National Bureau of Economic Research, the U.S. has one recession every ten years, and the longest peak was 128 months. If there is a recession coming, we should question whether or not mega-banks have become less complicated?

The Federal Reserve Bank of New York did a thorough research on the biggest U.S. Banks, they measured the organizational complexity of the fifty bank holding companies before 2007 and 2017, below is the data.

The Fed believes that the U.S. Bank became simpler in some ways, "The number of subsidiaries at these BHCs has declined substantially—the median number of subsidiaries fell from 84 to 42.5 between 2007 and 2017, and the maximum from over 2,800 to 1,335 in the same period. While over 1,000 subsidiaries certainly still a complicated organization, the decline suggests large BHCs are simplifying along this dimension. The fraction of these subsidiaries that are commercial banks (second row) fell for some banks and increased for others, implying that, on the net, many BHCs are shrinking the numbers of both the commercial bank and nonbank subsidiaries. BHCs also reduced their span across industries, though more modestly than the overall number of subsidiaries, suggesting that BHCs may be simplifying their organizational charts more than their industrial footprints. The geographic footprint of the central bank fell from four countries to two, while the maximum span fell from eighty countries to sixty-nine. "

The number of subsidiaries at these BHCs has declined substantially—the median number of subsidiaries fell from 84 to 42.5 between 2007 and 2017, and the maximum from over 2,800 to 1,335 in the same period. While over 1,000 subsidiaries certainly still a complicated organization, the decline suggests large BHCs are simplifying along this dimension. The fraction of these subsidiaries that are commercial banks (second row) fell for some banks and increased for others, implying that, on the net, many BHCs are shrinking the numbers of both the commercial bank and nonbank subsidiaries. BHCs also reduced their span across industries, though more modestly than the overall number of subsidiaries, suggesting that BHCs may be simplifying their organizational charts more than their industrial footprints. The geographic footprint of the median bank fell from four countries to two, while the maximum span fell from eighty countries to sixty-nine.

Leave a Comment