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The organizational form of financial institutions is related to their level of risk, leverage, liquidity and capitalization. High level of risk and leverage and lower levels of liquidity and capitalization are considered to be the root causes of the 2008 financial crisis. The purpose of this paper is to investigate if banks affiliated to holding company structure contributed more to the root causes of crisis than unaffiliated banks.

The paper isolates the effect of holding company association by restricting the sample to one-bank holding companies and individual banks. A comparative analysis of independent and holding company-affiliated banks is performed. Univariate analysis and multivariate regressions are used to compare the risk, leverage, liquidity and capitalization of affiliated and independent banks.

The paper finds that holding company affiliation is linked to several root causes of the 2008 financial crisis. Specifically, holding company affiliation results in higher levels of home mortgage loans underwritten and underperforming, higher leverage, lower liquidity and lower capitalization for the subsidiary bank.

The paper demonstrates that affiliated banks use their higher leveraged positions to engage in riskier home mortgage lending, sacrificing both liquidity and capital adequacy. These findings can help policy makers to focus on the group of banks that are part of holding company affiliation and implement such policies and regulations so as to avoid any re-occurrence of financial crisis.

This paper is the first to link the structural differences in banks to the root causes of financial crisis and to isolate the effect of holding company affiliation through sample selection. The paper will be valued to other researchers who try to isolate the effect of holding company affiliation and those studying the causes of the financial crisis of 2008.

This paper aims to examine the characteristics of banks that were the target of intervention in the form of bailout or failure during the financial crisis and, of those subjected to intervention, what characteristics distinguish those that received bailout funds from those that were deemed failures.

The study estimates a series of logit regressions in an effort to identify the causes of regulatory intervention while controlling for bank-level characteristics and the economic and regulatory environment.

The empirical results indicate that many of the same characteristics associated with banks receiving bailout funds are similar to the characteristics associated with failed banks. However, non-performing loans increased the likelihood of failure, but reduced the likelihood of a bank receiving Capital Purchase Program (CPP) funds, suggesting that regulatory authorities discriminated in their use of CPP funds based on the quality of a bank’s asset portfolio. Further, those banks located in states with limits on de novo branching and those banks that are part of a multi-bank holding company structure were less likely to fail but were more likely to receive CPP funds.

This paper provides a comprehensive analysis of regulatory intervention in the banking industry during the late 2000s financial crisis and the impact of different banking organizational structures, economic circumstances, and financial fragility on the likelihood of a bank failing or receiving bailout funds.

Using an event study approach, this analysis examines whether or not intracompany mergers of subsidiary banks by multibank holding companies result in significant, positive, abnormal stock returns. Such a result implies that investors expect this type of merger will improve future profitability, presumably by permitting efficiencies to be realized or revenues to increase. The analysis of the stock returns for a sample of 39 consolidating companies indicates that this is the case. These findings appear to be quite robust. Furthermore, the findings imply that permitting holding companies with interstate operations to consolidate their banking units across state lines could yield efficiencies as proponents of interstate branching claim.

There is an ongoing controversy over whether or not to extend commercial banks' nonbanking powers. Although the Glass‐Steagall Act of 1933 and the McFadden‐Pepper Act of 1927 restrict commercial banks' activities, the technological and financial innovations of the last several years have raised new questions. Whether banks should be allowed to undertake nonbanking activities? How profitable are these businesses? Whether banks will gain monopolistic powers? Will they increase FDIC's liabilities? And several other related questions. This study looks at the nonbanking activities of bank holding companies using a relatively new data source, i.e. FR‐Y11AS reports for the years 1989 and 1990. The performance of nonbanking subsidiaries is then compared with that of commercial banks and bank holding companies. Some meaningful inferences are drawn on issues such as market concentration, profitability, capitalization, and level of problem‐loans of nonbanking and banking subsidiaries, as well as, consolidated bank holding companies. Results from two prior studies are further utilized to look for possible trends. Since these studies have used the same data source (FR‐Y11Q and FR‐ Yl1AS) for the years 1986 through 1988, this facilitates a trend analysis over a five year period 1986–90. The main conclusions are that the BHC's nonbanking activities are heavily concentrated among the top five or ten firms within each activity. However, both the number of firms as well as total assets held in most nonbanking subsidiaries have declined over the five year period. Activities considered traditional, e.g. commercial and consumer finance and mortgage banking have suffered significant losses in terms of total assets and number of firms. Some interesting conclusions can be drawn from these results. First, due to the growing liberalization in interstate banking laws, BHCs can now carry on these activities in their bank subsidiaries and do not have to acquire a nonbanking subsidiary in order to capture business across state lines. Second, the glass walls separating banking from commerce may be cracking. Several states have started allowing banks to carry out some of the nonbanking activities, hence, considerably neutralizing the Glass‐Steagall Act. Insurance agencies and underwriting business of BHCs show the most significant growth over the five years, 1986–1990. Securities brokerage has held constant. Another finding is that the return on equity (ROE) for nonbanking firms has been lower than both the banking firms as well as the BHCs. However, this is mainly due to the relatively low equity capital levels for banks and BHCs. The nonbanking subsidiaries show fairly stable and relatively high capital ratios. Finally, for most part, nonbanking subsidiaries have a higher rate of problem‐loans.

An overview of the Act and the implementing regulations—with most of the focus on the regulations and how they affect the securities industry, along with a review of its effect on many different types of financial institutions.

This study provides evidence regarding the performance of bank holding companies (BHC) following a series of deregulatory measures by the United States Congress. To compare performance of commercial banks before and after expanding their operations to nonbank functions, a set of hypotheses addressing BHC risk and return characteristics are proposed. Empirical results are mixed. Total risk dropped after expansion. Market risk, on the other hand, rose substantially in post‐expansion time. When returns are adjusted for risk, a marginal improvement in performance is achieved.

The International Banking Act (IBA) of 1978 sharply restricted the ability of foreign banks to establish offices in more than one state. Yet during the late 1970s and early 1980s barriers to interstate banking with regard to US financial institutions were beginning to fall. The most important fact that contributed to foreign bank involvement in interstate commerce was the grandfather provision, which permitted multistate networks to remain in operation. New interstate banking has been curbed by restrictions on full‐service offices, but it has continued to develop through Edge‐Act Corporations, bank holding companies and the use of non‐bank banks. Interstate banking is likely to benefit the public and will probably continue to expand but at a slower rate and more in line with that of US banks.

This paper aims to examine the impact of charter type (national vs state), holding company structure, and measures of bank fragility on the likelihood of bank failure during the late 2000s financial crisis.

The study estimates a series of logit regressions in an effort to identify the causes of failure and assess the role of the bank‐level characteristics while controlling for the economic and regulatory environment.

The empirical results indicate that established institutions were more likely to fail, dependent upon whether a bank received bailout funds or not, if they were relatively large, had relatively low capital ratios, had relatively low liquidity, relied more heavily on brokered deposits, held a relatively large portfolio of real estate loans, had a relatively large proportion of non performing loans, and had less income diversity. Consistent with being financially fragile, de novo banks and those banks that grew substantially prior to the crisis faced an increased likelihood of failure relative to established banks. However, capital levels were not significantly related to the likelihood of failure in de novo institutions.

This paper provides a comprehensive analysis of the possible business models' impact on the likelihood of failure during the recent financial crisis. It contributes to the ongoing debate regarding appropriate regulatory reform in the banking industry by shedding light on the extent to which the business model decisions made by bank managers have an impact on the stability of the banking system.

This study aims to examine the intertemporal changes in the institutional ownership of publicly traded bank holding companies (BHCs) in the USA. The role of owned-subsidiary investing in the portfolio decisions is investigated as compared to unaffiliated banks and non-bank institutional investors.

The authors apply panel regressions that control bank-fixed and time-fixed effects to study the impact of prudence, liquidity, information advantages and historical returns on each type of the institutional ownership from 1986 to 2014.

The subsidiary banks tend to invest in more shares of their parent BHCs when they are traded for a short period of time and when they have low-market risk, low turnover, a low capital equity ratio and great reliance on off-balance activities. However, the impact of these determinants of institutional ownership is opposite for unaffiliated banks and non-bank institutions.

This study provides evidence that the criteria used by subsidiary banks to invest in their parent company stock are different than the unaffiliated banks and non-bank institutions, raising concerns about the owned-subsidiary investing activities and banks’ trustees’ duty to work in the best interest of their trust clients.

This paper provides a comprehensive analysis of the level and market value of BHC institutional ownership over the past three decades and the impact of different determinants on the ownership of BHCs by subsidiary banks, unaffiliated banks and non-bank institutional investors.

This chapter discusses how one bank, committed to social innovation and investment in low-income communities, evolved into a model of socially responsible banking and exemplary community development financial institution. The authors draw lessons from this experience and propose ways to apply those lessons to other financial institutions.

The chapter is based on an in-depth case study of ShoreBank. It includes extensive interviews with two of the bank’s cofounders, who served as the bank’s leaders for more than 37 years.

The case study has identified six key enabling factors for social innovation: (1) a social purpose that is deeply, and effectively, embedded in the organization’s mission, strategy, and operations; (2) an ownership structure to support the social mission and a structure (e.g., bank holding company) that facilitates social innovation; (3) capital capacity – that is, ability to create credit through leverage; (4) a deep level of knowledge about the business, the clientele, and the operating environment; (5) talented people who bring both skill and passion for the mission to the institution-building process; and (6) the discipline to continuously innovate, at a scale appropriate to the problem, with resources that are adequate to the challenge.

This work has several limitations including a focus on one U.S. bank holding company, and based on interviews with that bank’s cofounders.

The chapter provides a rich description of how social innovation through social investment created a meaningful social impact. Important lessons and useful recommendations are drawn for social enterprises that are committed to social innovation in the financial services industry.

The chapter provides insights into the ShoreBank case based on a unique set of data. It offers useful recommendations for social enterprises.