Too Big to Fail: A Never Ending Issue

Abstract

The twin financial and sovereign debt crisis occurred during the last decade fostered the already existent debate on the so called too-big-to-fail financial institutions (“TBTF”) issue. The present essay will try to critically discuss the effectivity of the main measures adopted insofar in order to address such topical problem, on which scholars and authorities in the field are still in disagreement, as the conflicting statements of the President of the FRB of Minneapolis, Neel Kashkari and the Governor of the BoE recently evidenced. In doing so, a first section will identify and define the TBTF issue, looking at the rationale and the consequences of such concept. Moving forward, the following section will focus on some selected regulatory initiatives recently adopted across the U.S. and the EU, aimed at eradicating the TBTF problem and the linked consequences. In the light of the analyses so provided, Section 4 will critically evaluate both positions of Mr. Kashkari and Mr. Carney, trying to assess whether the TBTF generating roots have been now eradicated by the regulations recently passed or if we are still far from a TBTF-free financial environment.