Did Subsidies to Too-Big-To-Fail Banks Increase during the COVID-19 Pandemic?

Asani Sarkar

No 20210211, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: Once a bank grows beyond a certain size or becomes too complex and interconnected, investors often perceive that it is “too big to fail” (TBTF), meaning that if the bank were to become distressed, the government would likely bail it out. In a recent post, I showed that the implicit funding subsidies to systemically important banks (SIBs) declined, on average, after a set of reforms for eliminating TBTF perceptions was implemented. In this post, I discuss whether these subsidies increased again during the COVID-19 pandemic and, if so, whether the increase accrued to large firms in all sectors of the economy.

Keywords: Too-Big-To-Fail; global banks; systemic risk; Financial Stability Board; COVID-19 (search for similar items in EconPapers)
JEL-codes: G21 G32 (search for similar items in EconPapers)
Date: 2021-02-11
New Economics Papers: this item is included in nep-ban and nep-rmg
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