Department/School

School of Business

Abstract

In the wake of the global financial crisis that erupted in 2008, there has been extensive commentary and regulatory focus on the ‘Too Big to Fail’ issue. In this paper, we survey the proposed solutions and regulatory initiatives that have been undertaken. We conduct a longitudinal analysis of major U.S. banks in four discrete time periods: pre-crisis (2005–2007), crisis (2008–2010), post-crisis (2011–2013) and normalcy (2014–2016). We find that risk metrics such as leverage and volatility which spiked during the crisis have reverted to pre-crisis levels and there has been improvement in the proportion of equity capital available to cushion against asset value deterioration. However, banks have grown in size and it does not appear as if their business models have been redirected toward more traditional lending activities. We believe that it is premature to conclude that ‘Too Big to Fail” has been solved, but macro-prudential regulation is now much more effective and, consequently, banks are on a considerably sounder footing since the depths of the crisis.

Document Type

Article

Publication Title

Journal of Risk and Financial Management

Publication Date

2-1-2019

Volume

12

Issue

1

Pages

1-224

Digital Object Identifier (DOI)

10.3390/jrfm12010024

Comments

This article is part of the special issue "Financial Crises, Macroeconomic Management, and Financial Regulation" in the Journal of Risk and Financial Management.

Document Version

Publisher's version

Creative Commons License

Creative Commons Attribution 4.0 License
This work is licensed under a Creative Commons Attribution 4.0 License.

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