Acharya, Viral; Yorulmazer, Tanju - Bank of England - 2007
While the ‘too-big-to-fail’ guarantee is explicitly a part of bank regulation in many countries, this paper shows that … bank closure policies also suffer from an implicit ‘too-many-to-fail’ problem: when the number of bank failures is large …, the regulator finds it ex-post optimal to bail out some or all failed banks, whereas when the number of bank failures is …