Posts tagged 'Too Big to Fail'

In America, bigger is better, especially when you’re a bank, and also defaulting

Bloggers on FT Alphaville are, from time to time, asked how we decide what topics or events to write about. This post is no tell all, but is rather an example of exactly how funny the road travelled can be.

The end of the road saw us reading about whether banks still can get much bigger (to fail), despite the regulatory and legislative efforts of the last few years, particularly in the US. What we found is that there’s a big escape clause in the legislation that makes us a bit queasy. Read more

Haldane on why King Kong & Godzilla, like big banks, are inefficient structures

First a reminder about this coming Monday, October 29th.

Andy Haldane, the Bank of England’s executive director for financial stability, will be giving a talk at Friends House, right across the road from Euston station. FT Alphaville is very happy to be chairing. Kickoff is 6pm.

While the event is free, you do have to reserve a seat. Click here to do so. Read more

BoE research shows big banks were too big to fail

Brace yourself. We have a formula:

P(eventi) = α + βXi + εi Read more

Carney says ‘too big to fail’ definition will be widened

Global regulators may expand the definition of a too-big-to-fail financial firm, signing up domestic lenders, clearing houses and insurers to capital rules designed for the world’s biggest banks, reports Bloomberg. The “framework should be in place for domestically systemically important banks by the end of the year,” Mark Carney, chairman of the Financial Stability Board, said on Tuesday after a meeting of the group in Basel. Mr Carney also said that the FSB was considering putting in place tougher rules for so-called shadow banks whose failure could harm the global financial system, but this work was less advanced than rules for systemic insurers. The FT reports that Mr Carney also announced that bankers who believe that rivals in other countries are violating new global restrictions on pay and bonuses will be able to complain to the FSB in future. Regulators from the two countries involved will investigate such allegations, and the FSB will track the complaints to see if they are clustered around particular countries, institutions or pay practices, Mr Carney said.

Credit rating cliff risk, redux

And the slow drain of financial crisis support from formerly ‘TBTF‘ banks continues apace.

On Thursday, Moody’s announced it would be putting the credit ratings of Bank of America, Citigroup and Wells Fargo on review for downgrade after taking a closer look at incoming financial reform: Read more

Outgoing Sigtarp punches Tarp goodbye

FT Alphaville was once told to always leave with a bang, not a whimper.

Similar advice has seemingly reached Neil Barofsky, the outgoing Sigtarp, who lambastes the implementation and legacy of the Tarp and Hamp programmes in a thundering NYT op-ed on Wednesday. Read more

The earnest importance of being systemic

It’s the question that’s seemingly stumped Tim Geithner: how to identify a priori systemically important non-bank financial institutions.

The Federal Reserve on Tuesday suggested further rules regarding who might be considered for attention by the Financial Stability Oversight Council (FSOC) as per section 113 of Dodd-Frank. In short, they need to be “financial” and “significant”. Read more

Too big to fail, fail?

Those worried that Dodd-Frank was overly-cautious in tackling ‘Too Big To Fail’ issues are unlikely to be comforted by the concentration limits study released on Tuesday by the Financial Stability Oversight Council (FSOC).

Quick background — Dodd-Frank prohibited a financial company from merging with or acquiring another firm, if the result was a company with over 10 per cent of the “aggregate consolidated liabilities” of all firms. Read more

A history lesson from the FCIC

In addition to grilling Dick Fuld on Wednesday, the FCIC has also quietly released a preliminary staff report documenting the history of ‘Too Big To Fail’ bailouts in the US and their relevance to the latest crisis.

The first use of the TBTF rationale for a government bailout after the post-war period can be traced to the FDIC’s rescue of Continental Illinois in 1984, the report says. This wasn’t the first post-WWII bailout, which came in 1974, just the first time TBTF was explicitly articulated by federal regulators. Read more