Too Big to Fail and Too Big to Save: Dilemmas for Banking Reform

95 Pages Posted: 19 Dec 2015

See all articles by James R. Barth

James R. Barth

Auburn University; Milken Institute

Clas Wihlborg

Chapman University; University West

Date Written: December 17, 2015

Abstract

“Too big to fail” traditionally refers to a bank that is perceived to generate unacceptable risk to the banking system and indirectly to the economy as a whole if it were to default and unable to fulfill its obligations. Such a bank generally has substantial liabilities to other banks through the payment system and other financial links, which can be sources of contagion if a bank fails. The main objectives in this paper are to identify the different dimensions of “too big to fail” and evaluate various proposed reforms for dealing with this problem. In addition, we document the various dimensions of size and complexity, which may contribute to or reduce a bank’s systemic risk. Furthermore, we provide an assessment of economic and political factors shaping the future of “too big to fail.”

Keywords: financial crises, too big to fail, systemically important banks, Dodd-Frank Act, Financial Stability Board, regulation and supervision

JEL Classification: G01, G18, G21, G28

Suggested Citation

Barth, James R. and Wihlborg, Clas, Too Big to Fail and Too Big to Save: Dilemmas for Banking Reform (December 17, 2015). Available at SSRN: https://ssrn.com/abstract=2705104 or http://dx.doi.org/10.2139/ssrn.2705104

James R. Barth (Contact Author)

Auburn University ( email )

415 West Magnolia Avenue
Auburn, AL 36849
United States
334-844-2469 (Phone)
334-844-4960 (Fax)

Milken Institute ( email )

1250 Fourth Street
Santa Monica, CA 90401
United States

Clas Wihlborg

Chapman University ( email )

333 N. Glassell
Orange, CA 92866
United States
+17147447630 (Phone)

University West ( email )

Trollhättan, 46186
Sweden

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