Big banks :to bail or to fail? -

Abstract

After the series of severe financial crises striking the economies of the world, policymakers and experts are becoming increasingly concerned about the risks big banks and financial institutions are posing to the economic and social well-being of their nations. It is necessary that we understand the structure of “too big to fail” banks and try to mitigate the systematic risks they impose. This will save us plenty of financial, economic, and social costs today and in the future. In this regard, I will present my thesis in five chapters. Chapter I covers a general introduction of the “too big to fail” theory of big bank bailout. Chapter II demonstrates a comprehensive analysis of bailout decisions in the United Stated while Chapter III tackles the European case while presenting an empirical model. Chapter IV outlines the major policies and recommendations which aim to avoid future crisis triggered by such bailouts. Finally, Chapter V concludes the thesis by emphasizing on the importance of developing clear and concise policies when it comes to dangerously large banks as bailing them out makes them even more hazardous.