Are Banks Too Big To Fail? Measuring Systemic Importance of Financial Institutions

Chen Zhou
2009 Social Science Research Network  
This paper empirically analyzes the determinants of banks' systemic importance. In constructing a measure on the systemic importance of financial institutions we find that size is a leading determinant. This confirms the usual "Too big to fail" argument. Nevertheless, banks with size above a sufficiently high level have equal systemic importance. In addition to size, we find that the extent to which banks engage in non-traditional banking activities is also positively related to banks' systemic
more » ... to banks' systemic importance. Therefore, in addition to "Too big to fail", systemically important financial institutions can also be identified by a "Too non-traditional to fail" principle.
doi:10.2139/ssrn.1546384 fatcat:f3n5mflizzh3dhgdftugzd3qli