Too Big to Fail: Measures, Remedies, and Consequences for Efficiency and Stability

71 Pages Posted: 16 Oct 2017

See all articles by James R. Barth

James R. Barth

Auburn University; Milken Institute

Clas Wihlborg

Chapman University; University West

Multiple version iconThere are 2 versions of this paper

Date Written: November 2017

Abstract

This paper evaluates whether reform efforts addressing “too big to fail” actually enhance the stability of the financial system, and whether trade‐offs exist between stability and efficiency. We also present and discuss various measures of bank size and complexity since such measures are essential for implementing appropriate corrective remedies. As we will show, there are no unambiguous measures of size or complexity that can fully capture a bank’s contribution to systemic risk. Their effects on efficiency are also impossible to capture with certainty. While we recognize the need for additional research and empirical evidence, we do identify weaknesses and strengths of proposed and implemented reforms that could have consequences for bank stability and efficiency.

Keywords: banking reform, bank stability, global banking, systemic risk, Too‐big‐to‐fail

JEL Classification: G20, G21, G28

Suggested Citation

Barth, James R. and Wihlborg, Clas, Too Big to Fail: Measures, Remedies, and Consequences for Efficiency and Stability (November 2017). Financial Markets, Institutions & Instruments, Vol. 26, Issue 4, pp. 175-245, 2017, Available at SSRN: https://ssrn.com/abstract=3053053 or http://dx.doi.org/10.1111/fmii.12083

James R. Barth (Contact Author)

Auburn University ( email )

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Auburn, AL 36849
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Milken Institute ( email )

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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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