Too-Big-To-Fail

Too-Big-To-Fail

Describing a concept or policy that certain companies are so systematically important to an economy that the government must intervene if they are in danger of bankruptcy or other failure. The idea behind a too-big-to-fail policy is that these companies do business with too many other companies, and their failure will cause a cascade effect adversely impacting the economy on a grand scale. Supporters of too-big-to-fail policies argue that they maintain economic stability, while critics allege that they encourage unnecessary risk taking.
References in periodicals archive ?
The too-big-to-fail problem in banking is the unwillingness of regulators to close a large troubled bank because of a belief that the short-term costs of a bank failure are too high.
Despite its of goal of keeping too-big-to-fail banks in check, many in the financial industry feel that Dodd-Frank missed the mark--failing to slow the proliferation of mega-banks while simultaneously stifling the growth of small- and medium-sized banks.
New York-based MetLife was the only company to challenge the too-big-to-fail status in court, Kandarian noted, and the "victory has preserved our ability to remain on a level playing field with others in the industry.
According to news reports, the Presidents executive orders would call for a review of two key provisions under the Dodd-Frank WallStreet Reform law to prevent another too-big-to-fail financial crisis.
McWatters added that this approach would require a deep resolve to stand the heat from the too-big-to-fail banks.
The Hague-based insurer was added last week to a list of nine too-big-to-fail insurers compiled by global financial rule makers, meaning it could face a 10 percent increase in capital requirements and tighter regulation.
Chief executive of Secure Trust Bank Paul Lynam said "The only way to address the too-big-to-fail problem is to foster the development of smaller banks".
This insensitivity of financing costs to risk will encourage too-big-to-fail banks to take on greater risk.
That is the key pending aspect on ending too-big-to-fail," said Andres Portilla, director of regulatory affairs at the Institute of International Finance, a Washington-based banking and insurance lobby.
Vincenz's statement came a couple of days after the cooperative lender was added to the list of too-big-to-fail banks by the Swiss National Bank, meaning it would come under close scrutiny.
In the aftermath of the financial crisis, the Dodd-Frank Act was passed in part to end the perception that some institutions were too-big-to-fail and to protect the taxpayer from the associated costs that it entailed.
Corporate governance incentives at too-big-to-fail financial firms deserve systematic examination.