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Breaking up big banks

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  • Kozubovska, Mariolia

Abstract

This paper discusses the proposals to limit the size of the banks, also known as tackling the banks’ incentives to become “too big to fail”. I examine how regulations to curb bank size may affect banks’ operating costs. I analyze the relationship between the size of U.S. bank holding companies (BHCs) and their operating costs from 2001:Q2 to 2014:Q1. I find that rules to limit the size of banks could significantly reduce economies of scale. In particular, if large and cost-efficient banks become split into smaller parts, data processing, legal fees, audit and consulting expenses, expenses on premises are likely to increase.

Suggested Citation

  • Kozubovska, Mariolia, 2017. "Breaking up big banks," Research in International Business and Finance, Elsevier, vol. 41(C), pages 198-219.
    • Handle: RePEc:eee:riibaf:v:41:y:2017:i:c:p:198-219
    DOI: 10.1016/j.ribaf.2017.04.004
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