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Determining size thresholds for the Too-Small-To-Survive and the Too-Big-To-Fail banks

Author

Listed:
  • Nikolaos I. Papanikolaou

    (Bournemouth University)

Abstract

In the recent crisis, the U.S. authorities bailed out numerous banks, while let many others to fail as going concern entities. Even though both interventions fully protect depositors, a bail out represents an implied subsidy to shareholders, which is not yet the case with closures where creditors are not subsidised. We investigate this non-uniform policy, demonstrating that size and not performance is the decision variable that endogenously determines one threshold below which banks are treated as Too-Small-To-Survive by regulators and another one above which are considered to be Too-Big-To-Fail.

Suggested Citation

  • Nikolaos I. Papanikolaou, 2018. "Determining size thresholds for the Too-Small-To-Survive and the Too-Big-To-Fail banks," BAFES Working Papers BAFES21, Department of Accounting, Finance & Economic, Bournemouth University.
    • Handle: RePEc:bam:wpaper:bafes21
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    File URL: https://repec.bmth.ac.uk/bam/wp/BAFES21.pdf
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    More about this item

    Keywords

    Distressed banks; Too-Big-To-Fail; Too-Small-To-Survive; bank size; threshold estimation;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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