Determining size thresholds for the Too-Small-To-Survive and the Too-Big-To-Fail banks

Nikolaos Papanikolaou ()

No BAFES21, BAFES Working Papers from Department of Accounting, Finance & Economic, Bournemouth University

Abstract: In the recent crisis, the U.S. authorities bailed out numerous banks, while let many others to fail as going concern entities. Even though both interventions fully protect depositors, a bail out represents an implied subsidy to shareholders, which is not yet the case with closures where creditors are not subsidised. We investigate this non-uniform policy, demonstrating that size and not performance is the decision variable that endogenously determines one threshold below which banks are treated as Too-Small-To-Survive by regulators and another one above which are considered to be Too-Big-To-Fail.

Keywords: Distressed banks; Too-Big-To-Fail; Too-Small-To-Survive; bank size; threshold estimation (search for similar items in EconPapers)
JEL-codes: G01 G21 G28 (search for similar items in EconPapers)
Pages: 11 pages
Date: 2018-06
New Economics Papers: this item is included in nep-ban
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