Too connected to fail: the institutionalisation of the hybrid model

By Muhammad Afif Izzuddin

In 2008, the global financial crisis forced governments to use an enormous sum of taxpayer funds to save failing banks through bail-outs. This intervention not only placed an unsustainable burden on public finances but also created a hazard: ¹ shareholders and creditors of too big to fail financial institutions might assume that the state will always rescue their firms should a viability event occur, practically incentivising risky, profit-taking business decisions. ²