| 单词 | too big to fail |
| 释义 | too big to fail too big to fail The notion that certain banks or other financial institutions will always be supported in a crisis, because their failure would have an unacceptable effect on the stability of the national or international financial system. If such an institution should get into trouble, it is argued, the central bank would be compelled to bail it out; awareness of this fact creates a significant moral hazard by making such a bank more willing to take risks. The counterargument is that even if it received aid, there might still be serious consequences for the managers and shareholders of the bank. In any case, the theory only applies to the largest financial institutions, and then not inevitably. Notoriously, in 2007 the US investment bank Lehman Brothers was allowed to fail after sustaining major losses on the subprime mortgage market, with systemic effects in both the USA and abroad. By contrast, the Federal Reserve Bank provided a $30 billion loan to prevent the collapse of Bear Sterns in 2008. In the UK the Bank of England and HM Treasury provided over £25 billion of emergency support to the mortgage bank Northern Rock in 2007–08; the government also bought an 82% stake in the Royal Bank of Scotland to prevent its collapse. SeeSIFIs. |
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