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Too Big to Fail: The Transatlantic Debate

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  • Morris Goldstein

    () (Peterson Institute for International Economics)

  • Nicolas Veron

    () (Peterson Institute for International Economics)

Abstract

Although the United States and the European Union were both seriously impacted by the financial crisis of 2007, resulting policy debates and regulatory responses have differed considerably on the two sides of the Atlantic. In this paper the authors examine the debates on the problem posed by “too big to fail” financial institutions. They identify variations in historical experiences, financial system structures, and political institutions that help one understand the differences of approaches between the United States, EU member states, and the EU institutions in addressing this problem. The authors then turn to possible remedies and how they may be differentially implemented in America and Europe. They conclude on which policy developments are likely in the near future.

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Bibliographic Info

Paper provided by Peterson Institute for International Economics in its series Working Paper Series with number WP11-2.

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Date of creation: Jan 2011
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Handle: RePEc:iie:wpaper:wp11-2

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Related research

Keywords: banks; comparative political economy; financial regulation; microprudential policy; too-big-to-fail;

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References

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  1. Focarelli, Dario & Pozzolo, Alberto Franco, 2001. "The patterns of cross-border bank mergers and shareholdings in OECD countries," Journal of Banking & Finance, Elsevier, vol. 25(12), pages 2305-2337, December.
  2. Laeven, Luc & Levine, Ross, 2007. "Is there a diversification discount in financial conglomerates?," Journal of Financial Economics, Elsevier, vol. 85(2), pages 331-367, August.
  3. Wim Fonteyne, 2007. "Cooperative Banks in Europe-Policy Issues," IMF Working Papers 07/159, International Monetary Fund.
  4. Thorsten Beck & Asli Demirguc-Kunt & Ross Levine, 2003. "Bank Concentration and Crises," NBER Working Papers 9921, National Bureau of Economic Research, Inc.
  5. Zoltan Pozsar & Tobias Adrian & Adam Ashcraft & Hayley Boesky, 2010. "Shadow banking," Staff Reports 458, Federal Reserve Bank of New York.
  6. David C. Wheelock & Paul Wilson, 2009. "Are U.S. banks too large?," Working Papers 2009-054, Federal Reserve Bank of St. Louis.
  7. Reinhart, Carmen & Rogoff, Kenneth, 2009. "This Time It’s Different: Eight Centuries of Financial Folly-Preface," MPRA Paper 17451, University Library of Munich, Germany.
  8. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "This Time Is Different: Eight Centuries of Financial Folly," Economics Books, Princeton University Press, edition 1, volume 1, number 8973.
  9. Morris Goldstein, 2010. "Confronting Asset Bubbles, Too Big to Fail, and Beggar-thy-Neighbor Exchange Rate Policies," Policy Briefs PB10-3, Peterson Institute for International Economics.
  10. Diamond, Douglas W, 1984. "Financial Intermediation and Delegated Monitoring," Review of Economic Studies, Wiley Blackwell, vol. 51(3), pages 393-414, July.
  11. James B. Thomson, 2009. "On systemically important financial institutions and progressive systemic mitigation," Policy Discussion Papers, Federal Reserve Bank of Cleveland, issue Aug.
  12. Amel, Dean & Barnes, Colleen & Panetta, Fabio & Salleo, Carmelo, 2004. "Consolidation and efficiency in the financial sector: A review of the international evidence," Journal of Banking & Finance, Elsevier, vol. 28(10), pages 2493-2519, October.
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Cited by:
  1. Zlatuse Komarkova & Vaclav Hausenblas & Jan Frait, 2012. "How To Identify Systemically Important Financial Institutions," Occasional Publications - Chapters in Edited Volumes, in: CNB Financial Stability Report 2011/2012, chapter 0, pages 100-111 Czech National Bank, Research Department.

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