Ratnovski, L., Laeven, L. & Tong, H. (2014) “Are banks too large?“, VoxEU Organisation, 31 May.
Large banks have grown and become more involved in market-based activities since the late 1990s. This column presents evidence that large banks receive too-big-to-fail subsidies and create systemic risk, whereas economies of scale in banking are modest. Hence, some large banks may be ‘too large’ from a social perspective. Since the optimal bank size is unknown, the best policies are capital surcharges and better bank resolution and governance.
Relevant posts:
- Mink, M. & de Haan, J. (2014) “Spillovers from systemic bank defaults“, VoxEU Organisation, 24 May.
- Ignatowski, M. & Korte, J. (2014) “Resolution threats and bank discipline“, VoxEU Organisation, 20 May.
- Bauer, M. & Demary, M. (2014) “European Banking Union: Status of Implementation and the Need for Improvement“, Konrand Adenauer Stiftung, 23 April.