Since the Great Depression in 1929, economists have never stopped soul-searching for the lessons to be drawn from the crisis. But mainstream reflections have been misguided, confined to stereotypical targets of blame such as “lax regulation,” “policy mistakes” and “underestimation of...

In this paper we analyse firm level systemic risk for US and European banks from 2004 to 2012. We observe that common systemic risk indicators are primarily driven by firm size which implies an overriding concern for “too-big-to-fail” institutions. However, smaller banks may still pose...