Recent regulatory proposals tie a financial institution's systemic importance to its complexity. However, little is 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'...

This study documents the association between the quality of risk management practices and operational loss realizations at large financial institutions in the United States. Using detailed supervisory data, we find that companies with weak risk management practices experience higher and more...