Andy Haldane:: Have we solved ‘too big to fail’?


If you still care about the role of Central Banks (you should, although it may not change much!) a guy like Andy Haldane is ALWAYS worth listening to. Here is his latest contribution…

As with systemic surcharges, the issue here is not to so much the bail-in principle, but its application in practice. Bail-in, whether of big banks, sovereigns or companies, faces an acute time-consistency problem. Policymakers face a trade-off between placing losses on a narrow set of tax-payers today (bail-in) or spreading that risk across a wider set of tax-payers today and tomorrow (bail-out).

A risk-averse, tax-smoothing government may tend towards the latter path – and historically has almost always done so, most notably in response to the present financial crisis. Next time may of course be different…

Have we solved ‘too big to fail’? | vox.

AH appeared in front of the Parliamentary Commission on Banking Standards (video) in November 2012. At the time I was prompted to explain my views on the subject of "ring-fencing"…

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