Although existing empirical work is again scant, one often hears the suggestion that complexity and agency problems may lead to diseconomies for financial firms under certain circumstances, a proposition that should be considered alongside the hypotheses for positive scale and scope effects.
6 The second point is that the size and composition of a financial firm’s balance sheet play a complicated role in producing economies of scope and scale. To be sure, a large trading book or custody business might produce social benefits by allowing a bank to match or clear both sides of transactions at lower cost.