THE EFFECT OF THE DODD-FRANK ACT 2010 ON THE RISK EXPOSURE OF COMPLEX BANK HOLDING COMPANIES

We examine the impact of the 2010 Dodd-Frank Act on the risk exposure of Bank Holding Companies. Our findings show that the Dodd-Frank Act enhances the stability of those complex banks classified as either credit-extending institutions or defined as complex by supervisory-judgment and high-risk activities, while it did not impact on other types of institutions. Our findings for shadow-banking activities are mixed. Complex institutions with credit-extending activities and complex by supervisory-judgment are the only entities to have reduced respectively their income derived from activities with their nonbank affiliates and investments in their non-bank subsidiaries. Instead, complex institutions with high risk activities and complex by management factor increased their investments with non-bank affiliates after the regulatory change. At the aggregate level, consolidated bank holding companies appear to have increased engagement in nontraditional financial activities with their non-bank affiliates.