Discuss reasons for the growth of larger and larger financial institutions and why regulators have been concerned about the ability to manage large financial institutions.

Question

Quizplus · Accepted Answer

The Answer is With the growth of technology, it became easier for larger and larger financial institutions to be managed under one umbrella. Also with deregulation, such as in the U.S. with the passage of the Gramm Leach Bliley Act of 1999 (allowing banks, insurance, investment and security firms to operate under the same umbrella), more than 640 bank holding companies elected to become financial holding companies (FHCs) to become diversified financial firms. Many financial services firms started out as finance companies, while others began with the merger of several finance, insurance, and investment companies over a decade. With cultural, regulatory, and other country differences, management complexity increases. Regulators have been concerned about the challenges of corporate control and risk management for diversified financial companies. Since a number of huge financial services firms having severe liquidity problems and were on the brink of bankruptcy during the Subprime Crisis and the Global Recession, concerns have increased about too big to manage and too big to fail institutions.

Discuss Reasons for the Growth of Larger and Larger Financial