Too big to fail?! Leçons de la crise financière

Sebastian C. Moenninghoff and Axel Wieandt

Revue d'économie financière, 2011, vol. N° 101, issue 1, 231-260

Abstract: This article examines the emergence and evolution of the ?Too-Big-To-Fail? (TBTF) doctrine based on various case studies, identifying moral hazard as the cause for externalities. It examines the role of TBTF within the recent financial crisis with regard to its contribution to and appearance in the crisis. In drawing lessons from the current crisis, a broader concept of systemic relevance is developed building on bank characteristics beyond sheer size. Referred to as ?Systemically Important Financial Institutions? by the Financial Stability Board, it is argued that these banks should be regulated rather than downsized or broken up considering the advantages of having large diversified global banks. The article evaluates FSB?s proposed regulatory measures, including capital surcharges, resolution regimes, enhanced supervision and improved core financial infrastructure, and identifies resolution regimes as the most efficient mechanisms to counter TBTF. If designed appropriately, such resolution regimes could convert TBTF into TBDF, or ?Too Big for Disorderly Failure?. Finally, the article warns that in reaching a new equilibrium in the financial system, unintended consequences such as concentration, competitive distortion and regulatory arbitrage have to be taken into account. Classification JEL: G21, G28, E51.

JEL-codes: E51 G21 G28 (search for similar items in EconPapers)
Date: 2011
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.cairn.info/load_pdf.php?ID_ARTICLE=ECOFI_101_0231 (application/pdf)
http://www.cairn.info/revue-d-economie-financiere-2011-1-page-231.htm (text/html)
free

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cai:refaef:ecofi_101_0231

Access Statistics for this article

More articles in Revue d'économie financière from Association d'économie financière
Bibliographic data for series maintained by Jean-Baptiste de Vathaire ().