Do Deposit Rates Show Evidence of Too Big to Fail Effects? (Oliver Wyman)

April 2014

KEYWORDS: banks, too big to fail, regulatory reform, market participants, financial institutions, compliance cost

Authors:

Aditi Kumar and John Lester

Organizations:
  • Oliver Wyman

Summary:
Ensuring that a subset of financial firms do not benefit from the perception that they are “too big to fail” (TBTF) is an important, frequently stated goal of ongoing financial regulatory reform efforts. Robustly assessing the empirical evidence of whether market perceptions of TBTF status reduce funding costs for some institutions is challenging but critical. As new financial regulations intended to combat TBTF take effect, ongoing measurements of TBTF funding cost advantages can serve as a scorecard for financial reform efforts to date, and a useful indicator of whether alternative reforms may be needed to succeed in the battle against TBTF.

Related Research and Data