prices. Using the gradual deregulation of banks' nonbank activities during 1996-1999 as a natural experiment, we show that t … significantly with their business complexity. This trend is particularly strong for banks that were bound by regulations beforehand …, especially for those with an existing Section 20 subsidiary, and weaker for other banks that were not bound and for nonbank …

known about how complexity affects banks' risk management. Using the 1996-1999 deregulations of U.S. banks' nonbanking … activities as a natural experiment, we show that banks' business complexity increases their operational risk. This result is … driven by banks that had been constrained by regulations, compared with other banks and also with nonbank financial …