Too big to fail Effects on competition and implications for banking supervision
Identifieur interne : 001286 ( Istex/Corpus ); précédent : 001285; suivant : 001287Too big to fail Effects on competition and implications for banking supervision
Auteurs : Michael WolgastSource :
- Journal of Financial Regulation and Compliance [ 1358-1988 ] ; 2001-04-01.
English descriptors
- Teeft :
- Anstaltslast, Bank managers, Banking, Banking crises, Banking industry, Banking sector, Banking supervision, Banking system, Basis points, Bayerische, Better rating, Bundesbank, Business difficulties, Business problems, Central bank, Central banks, Competitive advantages, Competitive distortions, Creditor, Decisive role, Default, Deposit insurance, Deutsche, Deutsche bank, Dresdner bank, Empirical evidence, Equity capital, Euro area, European level, European system, Excessive risk, External support, Financial regulation, Financial strength, Fitch, Fitch ibca, Further contributions, German bank, German banks, German insurance association, German savings banks, Higher risks, Home country, Ibca, Implicit guarantees, Individual banks, Individual rating, Individual ratings, Institutional arrangement, Interbank, Interbank market, Landesbank, Landesbanken, Large bank, Large banks, Larger banks, Largest banks, Last resort, Michael wolgast, Moral hazard, National borders, Overall rating, Press release, Private sector, Public sector, Public sector banks, Rating, Recent years, Refinancing, Refinancing advantage, Refinancing advantages, Refinancing line, Rescue operations, Safety mechanisms, Savings banks, Shareholder, Smaller banks, State guarantees, Substantial implications, Supervisory, Supervisory authorities, Supervisory authority, Support rating, Support ratings, Systemic risk, Tbtf, Tbtf effects, Third parties, Various rating components, Wolgast.
Abstract
Despite a raft of important qualitative reservations and at best poor empirical evidence, the argument that, in case of business problems, large banks are more likely to be bailed out by government intervention than smaller banks too big to fail cannot be dismissed entirely. The question, though, is whether or to what extent this has any implications for competition or the stability of the banking system. Under realistic assumptions, especially with respect to incentives for bank management and shareholders, too big to fail hardly leads to excessive risk taking by large banks. The impact of too big to fail on a bank's rating and, accordingly, its refinancing conditions is only marginal, as a breakdown of the various rating components clearly documents. This suggests that the effects on competition of too big to fail come nowhere close to the refinancing advantages enjoyed by public sector banks in Germany. The refinancing advantage of the Landesbanken afforded by state guarantees Anstaltslast and Gewhrtragerhftung comes to as much as 50 basis points. Given the continual narrowing of lending margins, an advantage on this scale plays a decisive role in competition. Too big to fail has substantial implications for the architecture of banking supervision. Suitable institutional arrangements need to be created in order to deal with large banks in case of a, potentially systemic, crisis. With banking becoming increasingly global and the number of crossborder mergers on the rise, this requires solutions at an international, if not at a global, level. Implementing the concept of a European LikoBank, as suggested by the Bundesbank, will require that the supervisory authorities and the European System of Central Banks ESCB first create appropriate public sector counterparts.
Url:
DOI: 10.1108/eb025089
Links to Exploration step
ISTEX:B55D4726A9760C18915328E05252487829EF42ACLe document en format XML
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The question, though, is whether or to what extent this has any implications for competition or the stability of the banking system. Under realistic assumptions, especially with respect to incentives for bank management and shareholders, too big to fail hardly leads to excessive risk taking by large banks. The impact of too big to fail on a bank's rating and, accordingly, its refinancing conditions is only marginal, as a breakdown of the various rating components clearly documents. This suggests that the effects on competition of too big to fail come nowhere close to the refinancing advantages enjoyed by public sector banks in Germany. The refinancing advantage of the Landesbanken afforded by state guarantees Anstaltslast and Gewhrtragerhftung comes to as much as 50 basis points. Given the continual narrowing of lending margins, an advantage on this scale plays a decisive role in competition. Too big to fail has substantial implications for the architecture of banking supervision. Suitable institutional arrangements need to be created in order to deal with large banks in case of a, potentially systemic, crisis. With banking becoming increasingly global and the number of crossborder mergers on the rise, this requires solutions at an international, if not at a global, level. Implementing the concept of a European LikoBank, as suggested by the Bundesbank, will require that the supervisory authorities and the European System of Central Banks ESCB first create appropriate public sector counterparts.</div></front></TEI><istex><corpusName>emerald</corpusName><keywords><teeft><json:string>tbtf</json:string><json:string>landesbank</json:string><json:string>refinancing</json:string><json:string>anstaltslast</json:string><json:string>large banks</json:string><json:string>landesbanken</json:string><json:string>bundesbank</json:string><json:string>interbank</json:string><json:string>banking</json:string><json:string>wolgast</json:string><json:string>refinancing advantages</json:string><json:string>banking system</json:string><json:string>ibca</json:string><json:string>creditor</json:string><json:string>public sector banks</json:string><json:string>state guarantees</json:string><json:string>business problems</json:string><json:string>deutsche bank</json:string><json:string>german banks</json:string><json:string>supervisory authorities</json:string><json:string>systemic risk</json:string><json:string>public sector</json:string><json:string>deutsche</json:string><json:string>moral hazard</json:string><json:string>large bank</json:string><json:string>support rating</json:string><json:string>implicit guarantees</json:string><json:string>fitch</json:string><json:string>competitive advantages</json:string><json:string>german savings banks</json:string><json:string>private sector</json:string><json:string>fitch ibca</json:string><json:string>individual rating</json:string><json:string>dresdner bank</json:string><json:string>external support</json:string><json:string>individual ratings</json:string><json:string>european level</json:string><json:string>supervisory authority</json:string><json:string>supervisory</json:string><json:string>bayerische</json:string><json:string>shareholder</json:string><json:string>central bank</json:string><json:string>national borders</json:string><json:string>interbank market</json:string><json:string>central banks</json:string><json:string>banking industry</json:string><json:string>bank managers</json:string><json:string>basis points</json:string><json:string>financial strength</json:string><json:string>better rating</json:string><json:string>michael wolgast</json:string><json:string>larger banks</json:string><json:string>excessive risk</json:string><json:string>individual banks</json:string><json:string>deposit insurance</json:string><json:string>euro area</json:string><json:string>rating</json:string><json:string>last resort</json:string><json:string>european system</json:string><json:string>financial regulation</json:string><json:string>rescue operations</json:string><json:string>banking supervision</json:string><json:string>equity capital</json:string><json:string>third parties</json:string><json:string>recent years</json:string><json:string>empirical evidence</json:string><json:string>smaller banks</json:string><json:string>decisive role</json:string><json:string>support ratings</json:string><json:string>press release</json:string><json:string>substantial implications</json:string><json:string>various rating components</json:string><json:string>overall rating</json:string><json:string>german bank</json:string><json:string>banking sector</json:string><json:string>further contributions</json:string><json:string>business difficulties</json:string><json:string>refinancing advantage</json:string><json:string>safety mechanisms</json:string><json:string>banking crises</json:string><json:string>institutional arrangement</json:string><json:string>german insurance association</json:string><json:string>competitive distortions</json:string><json:string>home country</json:string><json:string>tbtf effects</json:string><json:string>savings banks</json:string><json:string>largest banks</json:string><json:string>higher risks</json:string><json:string>refinancing line</json:string><json:string>default</json:string></teeft></keywords><author><json:item><name>Michael Wolgast</name><affiliations><json:string>German Insurance Association GDV, Friedrichstrasse 191, D10117 Berlin, Germany</json:string></affiliations></json:item></author><language><json:string>eng</json:string></language><originalGenre><json:string>review-article</json:string></originalGenre><abstract>Despite a raft of important qualitative reservations and at best poor empirical evidence, the argument that, in case of business problems, large banks are more likely to be bailed out by government intervention than smaller banks too big to fail cannot be dismissed entirely. The question, though, is whether or to what extent this has any implications for competition or the stability of the banking system. Under realistic assumptions, especially with respect to incentives for bank management and shareholders, too big to fail hardly leads to excessive risk taking by large banks. The impact of too big to fail on a bank's rating and, accordingly, its refinancing conditions is only marginal, as a breakdown of the various rating components clearly documents. This suggests that the effects on competition of too big to fail come nowhere close to the refinancing advantages enjoyed by public sector banks in Germany. The refinancing advantage of the Landesbanken afforded by state guarantees Anstaltslast and Gewhrtragerhftung comes to as much as 50 basis points. Given the continual narrowing of lending margins, an advantage on this scale plays a decisive role in competition. Too big to fail has substantial implications for the architecture of banking supervision. Suitable institutional arrangements need to be created in order to deal with large banks in case of a, potentially systemic, crisis. With banking becoming increasingly global and the number of crossborder mergers on the rise, this requires solutions at an international, if not at a global, level. Implementing the concept of a European LikoBank, as suggested by the Bundesbank, will require that the supervisory authorities and the European System of Central Banks ESCB first create appropriate public sector counterparts.</abstract><qualityIndicators><score>10</score><pdfVersion>1.3</pdfVersion><pdfPageSize>2367 x 3248 pts</pdfPageSize><refBibsNative>false</refBibsNative><keywordCount>0</keywordCount><abstractCharCount>1795</abstractCharCount><pdfWordCount>5097</pdfWordCount><pdfCharCount>34732</pdfCharCount><pdfPageCount>12</pdfPageCount><abstractWordCount>278</abstractWordCount></qualityIndicators><title>Too big to fail Effects on competition and implications for banking supervision</title><genre><json:string>review-article</json:string></genre><host><title>Journal of Financial Regulation and Compliance</title><language><json:string>unknown</json:string></language><doi><json:string>10.1108/jfrc</json:string></doi><issn><json:string>1358-1988</json:string></issn><publisherId><json:string>jfrc</json:string></publisherId><volume>9</volume><issue>4</issue><pages><first>361</first><last>372</last></pages><genre><json:string>journal</json:string></genre><subject><json:item><value>Accounting & finance</value></json:item><json:item><value>Financial risk/company failure</value></json:item></subject></host><categories><inist><json:string>sciences humaines et sociales</json:string></inist></categories><publicationDate>2001</publicationDate><copyrightDate>2001</copyrightDate><doi><json:string>10.1108/eb025089</json:string></doi><id>B55D4726A9760C18915328E05252487829EF42AC</id><score>1</score><fulltext><json:item><extension>pdf</extension><original>true</original><mimetype>application/pdf</mimetype><uri>https://api.istex.fr/document/B55D4726A9760C18915328E05252487829EF42AC/fulltext/pdf</uri></json:item><json:item><extension>zip</extension><original>false</original><mimetype>application/zip</mimetype><uri>https://api.istex.fr/document/B55D4726A9760C18915328E05252487829EF42AC/fulltext/zip</uri></json:item><istex:fulltextTEI uri="https://api.istex.fr/document/B55D4726A9760C18915328E05252487829EF42AC/fulltext/tei"><teiHeader><fileDesc><titleStmt><title level="a" type="main" xml:lang="en">Too big to fail Effects on competition and implications for banking supervision</title><respStmt><resp>Références bibliographiques récupérées via GROBID</resp><name resp="ISTEX-API">ISTEX-API (INIST-CNRS)</name></respStmt></titleStmt><publicationStmt><authority>ISTEX</authority><publisher>MCB UP Ltd</publisher><availability><p>© MCB UP Limited</p></availability><date>2001</date></publicationStmt><sourceDesc><biblStruct type="inbook"><analytic><title level="a" type="main" xml:lang="en">Too big to fail Effects on competition and implications for banking supervision</title><author xml:id="author-0000"><persName><forename type="first">Michael</forename><surname>Wolgast</surname></persName><affiliation>German Insurance Association GDV, Friedrichstrasse 191, D10117 Berlin, Germany</affiliation></author><idno type="istex">B55D4726A9760C18915328E05252487829EF42AC</idno><idno type="DOI">10.1108/eb025089</idno><idno type="filenameID">3110090406</idno><idno type="original-pdf">3110090406.pdf</idno><idno type="href">eb025089.pdf</idno></analytic><monogr><title level="j">Journal of Financial Regulation and Compliance</title><idno type="pISSN">1358-1988</idno><idno type="PublisherID">jfrc</idno><idno type="DOI">10.1108/jfrc</idno><imprint><publisher>MCB UP Ltd</publisher><date type="published" when="2001-04-01"></date><biblScope unit="volume">9</biblScope><biblScope unit="issue">4</biblScope><biblScope unit="page" from="361">361</biblScope><biblScope unit="page" to="372">372</biblScope></imprint></monogr></biblStruct></sourceDesc></fileDesc><profileDesc><creation><date>2001</date></creation><langUsage><language ident="en">en</language></langUsage><abstract xml:lang="en"><p>Despite a raft of important qualitative reservations and at best poor empirical evidence, the argument that, in case of business problems, large banks are more likely to be bailed out by government intervention than smaller banks too big to fail cannot be dismissed entirely. The question, though, is whether or to what extent this has any implications for competition or the stability of the banking system. Under realistic assumptions, especially with respect to incentives for bank management and shareholders, too big to fail hardly leads to excessive risk taking by large banks. The impact of too big to fail on a bank's rating and, accordingly, its refinancing conditions is only marginal, as a breakdown of the various rating components clearly documents. This suggests that the effects on competition of too big to fail come nowhere close to the refinancing advantages enjoyed by public sector banks in Germany. The refinancing advantage of the Landesbanken afforded by state guarantees Anstaltslast and Gewhrtragerhftung comes to as much as 50 basis points. Given the continual narrowing of lending margins, an advantage on this scale plays a decisive role in competition. Too big to fail has substantial implications for the architecture of banking supervision. Suitable institutional arrangements need to be created in order to deal with large banks in case of a, potentially systemic, crisis. With banking becoming increasingly global and the number of crossborder mergers on the rise, this requires solutions at an international, if not at a global, level. Implementing the concept of a European LikoBank, as suggested by the Bundesbank, will require that the supervisory authorities and the European System of Central Banks ESCB first create appropriate public sector counterparts.</p></abstract><textClass><keywords scheme="Emerald Subject Group"><list><label>cat-ACF</label><label>cat-FRCF</label><item><term>Accounting & finance</term></item><item><term>Financial risk/company failure</term></item></list></keywords></textClass></profileDesc><revisionDesc><change when="2001-04-01">Published</change><change xml:id="refBibs-istex" who="#ISTEX-API" when="2017-03-16">References added</change></revisionDesc></teiHeader></istex:fulltextTEI><json:item><extension>txt</extension><original>false</original><mimetype>text/plain</mimetype><uri>https://api.istex.fr/document/B55D4726A9760C18915328E05252487829EF42AC/fulltext/txt</uri></json:item></fulltext><metadata><istex:metadataXml wicri:clean="corpus emerald not found" wicri:toSee="no header"><istex:xmlDeclaration>version="1.0" encoding="UTF-8"</istex:xmlDeclaration><istex:document><!-- Auto generated NISO JATS XML created by Atypon out of MCB DTD source files. Do Not Edit! --><article dtd-version="1.0" xml:lang="en" article-type="review-article"><front><journal-meta><journal-id journal-id-type="publisher-id">jfrc</journal-id><journal-id journal-id-type="doi">10.1108/jfrc</journal-id><journal-title-group><journal-title>Journal of Financial Regulation and Compliance</journal-title></journal-title-group><issn pub-type="ppub">1358-1988</issn><publisher><publisher-name>MCB UP Ltd</publisher-name></publisher></journal-meta><article-meta><article-id pub-id-type="doi">10.1108/eb025089</article-id><article-id pub-id-type="original-pdf">3110090406.pdf</article-id><article-id pub-id-type="filename">3110090406</article-id><article-categories><subj-group subj-group-type="type-of-publication"><compound-subject><compound-subject-part content-type="code">review-article</compound-subject-part><compound-subject-part content-type="label">General review</compound-subject-part></compound-subject></subj-group><subj-group subj-group-type="subject"><compound-subject><compound-subject-part content-type="code">cat-ACF</compound-subject-part><compound-subject-part content-type="label">Accounting & finance</compound-subject-part></compound-subject><subj-group><compound-subject><compound-subject-part content-type="code">cat-FRCF</compound-subject-part><compound-subject-part content-type="label">Financial risk/company failure</compound-subject-part></compound-subject></subj-group></subj-group></article-categories><title-group><article-title>‘Too big to fail’: Effects on competition and implications for banking supervision</article-title></title-group><contrib-group><contrib contrib-type="author"><string-name><given-names>Michael</given-names> <surname>Wolgast</surname></string-name><aff>German Insurance Association (GDV), Friedrichstrasse 191, D‐10117 Berlin, Germany</aff></contrib></contrib-group><pub-date pub-type="ppub"><day>1</day><month>4</month><year>2001</year></pub-date><volume>9</volume><issue>4</issue><fpage>361</fpage><lpage>372</lpage><permissions><copyright-statement>© MCB UP Limited</copyright-statement><copyright-year>2001</copyright-year><license license-type="publisher"><license-p></license-p></license></permissions><self-uri content-type="pdf" xlink:href="eb025089.pdf"></self-uri><abstract><p>Despite a raft of important qualitative reservations and at best poor empirical evidence, the argument that, in case of business problems, large banks are more likely to be bailed out by government intervention than smaller banks (‘too big to fail’) cannot be dismissed entirely. The question, though, is whether or to what extent this has any implications for competition or the stability of the banking system. Under realistic assumptions, especially with respect to incentives for bank management and shareholders, too big to fail hardly leads to excessive risk taking by large banks. The impact of too big to fail on a bank's rating and, accordingly, its refinancing conditions is only marginal, as a breakdown of the various rating components clearly documents. This suggests that the effects on competition of too big to fail come nowhere close to the refinancing advantages enjoyed by public sector banks in Germany. The refinancing advantage of the Landesbanken afforded by state guarantees (Anstaltslast and Gewährtragerhäftung) comes to as much as 50 basis points. Given the continual narrowing of lending margins, an advantage on this scale plays a decisive role in competition. Too big to fail has substantial implications for the architecture of banking supervision. Suitable institutional arrangements need to be created in order to deal with large banks in case of a, potentially systemic, crisis. With banking becoming increasingly global and the number of cross‐border mergers on the rise, this requires solutions at an international, if not at a global, level. Implementing the concept of a European Liko‐Bank, as suggested by the Bundesbank, will require that the supervisory authorities and the European System of Central Banks (ESCB) first create appropriate public sector counterparts.</p></abstract><custom-meta-group><custom-meta><meta-name>peer-reviewed</meta-name><meta-value>no</meta-value></custom-meta><custom-meta><meta-name>academic-content</meta-name><meta-value>no</meta-value></custom-meta><custom-meta><meta-name>rightslink</meta-name><meta-value>included</meta-value></custom-meta></custom-meta-group></article-meta></front></article></istex:document></istex:metadataXml><mods version="3.6"><titleInfo lang="en"><title>Too big to fail Effects on competition and implications for banking supervision</title></titleInfo><titleInfo type="alternative" lang="en" contentType="CDATA"><title>Too big to fail Effects on competition and implications for banking supervision</title></titleInfo><name type="personal"><namePart type="given">Michael</namePart><namePart type="family">Wolgast</namePart><affiliation>German Insurance Association GDV, Friedrichstrasse 191, D10117 Berlin, Germany</affiliation></name><typeOfResource>text</typeOfResource><genre type="review-article" displayLabel="review-article"></genre><originInfo><publisher>MCB UP Ltd</publisher><dateIssued encoding="w3cdtf">2001-04-01</dateIssued><copyrightDate encoding="w3cdtf">2001</copyrightDate></originInfo><language><languageTerm type="code" authority="iso639-2b">eng</languageTerm><languageTerm type="code" authority="rfc3066">en</languageTerm></language><physicalDescription><internetMediaType>text/html</internetMediaType></physicalDescription><abstract lang="en">Despite a raft of important qualitative reservations and at best poor empirical evidence, the argument that, in case of business problems, large banks are more likely to be bailed out by government intervention than smaller banks too big to fail cannot be dismissed entirely. The question, though, is whether or to what extent this has any implications for competition or the stability of the banking system. Under realistic assumptions, especially with respect to incentives for bank management and shareholders, too big to fail hardly leads to excessive risk taking by large banks. The impact of too big to fail on a bank's rating and, accordingly, its refinancing conditions is only marginal, as a breakdown of the various rating components clearly documents. This suggests that the effects on competition of too big to fail come nowhere close to the refinancing advantages enjoyed by public sector banks in Germany. The refinancing advantage of the Landesbanken afforded by state guarantees Anstaltslast and Gewhrtragerhftung comes to as much as 50 basis points. Given the continual narrowing of lending margins, an advantage on this scale plays a decisive role in competition. Too big to fail has substantial implications for the architecture of banking supervision. Suitable institutional arrangements need to be created in order to deal with large banks in case of a, potentially systemic, crisis. With banking becoming increasingly global and the number of crossborder mergers on the rise, this requires solutions at an international, if not at a global, level. Implementing the concept of a European LikoBank, as suggested by the Bundesbank, will require that the supervisory authorities and the European System of Central Banks ESCB first create appropriate public sector counterparts.</abstract><relatedItem type="host"><titleInfo><title>Journal of Financial Regulation and Compliance</title></titleInfo><genre type="journal">journal</genre><subject><genre>Emerald Subject Group</genre><topic authority="SubjectCodesPrimary" authorityURI="cat-ACF">Accounting & finance</topic><topic authority="SubjectCodesSecondary" authorityURI="cat-FRCF">Financial risk/company failure</topic></subject><identifier type="ISSN">1358-1988</identifier><identifier type="PublisherID">jfrc</identifier><identifier type="DOI">10.1108/jfrc</identifier><part><date>2001</date><detail type="volume"><caption>vol.</caption><number>9</number></detail><detail type="issue"><caption>no.</caption><number>4</number></detail><extent unit="pages"><start>361</start><end>372</end></extent></part></relatedItem><identifier type="istex">B55D4726A9760C18915328E05252487829EF42AC</identifier><identifier type="DOI">10.1108/eb025089</identifier><identifier type="filenameID">3110090406</identifier><identifier type="original-pdf">3110090406.pdf</identifier><identifier type="href">eb025089.pdf</identifier><accessCondition type="use and reproduction" contentType="copyright">© MCB UP Limited</accessCondition><recordInfo><recordContentSource>EMERALD</recordContentSource></recordInfo></mods></metadata><serie></serie></istex></record>Pour manipuler ce document sous Unix (Dilib)
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