Systemically important institutions too big to fail

G A Walker, CCLS, Queen Mary, University of London, evaluates the complexity of Too-Big-to-Fail and the various forms in which it manifests itself - with guidance for policy makers dealing with such issues.

The “too big to fail” ideology raises difficult issues with regard to the purpose, structure and operation of modern financial regulation. It is a complex or composite idea that involves a number of separate issues, which can be more clearly understood by breaking it up into its relevant components. The same issue arises with regard to the ‘single regulator’ debate, which can be more accurately understood in terms of single regulator (agency integration), single regulation (legal or regulatory integration) and single markets (sector or market integration). A more effective analysis and set of final conclusions can be drawn where each of the key components is identified and examined separately.