One size fits all? The differential impact of parent capital on bank failures.

• OBHC-banks had a 2–3% higher probability of failing than did MBHC-banks during the sub-prime crisis, controlling for the nonrandom assignment and other covariates. • BHCTIER1 is a significant factor influencing the probability of failure for MBHC-banks, but not for OBHC-banks. • In OBHC-banks, a greater number of bank-specific indicators are significant in determining their failures and their marginal effects are stronger than MBHC-banks. Recent regulations increased minimum capital standards for bank holding companies. We test the effectiveness of this action in preventing bank failures during the sub-prime mortgage crisis. We find that while holding company capital is the most influential variable in the failures of banks affiliated with multi-bank holding companies, this is not the case for banks affiliated with a one-bank holding company. For these banks, the bank's own characteristics are more influential than group capital, meaning the established standards may not be universally effective. [ABSTRACT FROM AUTHOR]