Final answer:
The statement is true as decentralized decision-making in multibank holding companies can lead to inefficiencies that prevent full realization of economies of scale. Centralizing key decisions can allow for standardized processes and cost reduction, though it may result in trade-offs like reduced flexibility.
Step-by-step explanation:
The statement that it is more difficult for multibank holding companies to realize economies of scale if they allow subsidiary banks to retain key decision-making authority is generally true. When decision-making is decentralized, it can lead to a lack of uniformity in processes and systems across the subsidiaries, which can prevent the company from taking full advantage of economies of scale. This can hinder cost savings and efficiency that come from standardized and streamlined operations across the entire organization. Economies of scale are achieved when increased production leads to lower costs per unit due to fixed costs being spread over more units of output. If subsidiary banks within a holding company make independent decisions, this could lead to duplication of efforts, different technological platforms, and other inefficiencies that make it difficult to reduce costs overall.
In contrast, when a holding company centralizes key decisions, it can implement uniform procedures, negotiate better terms with vendors due to higher volumes, and better coordinate across its subsidiaries. However, it's important to note that there may be trade-offs, such as decreased flexibility and higher regulatory scrutiny when decisions are centralized.