Tax Banks to Shrink Too-Big-to-Fail Lenders: Cutting Research

Regulators should throw out the old rule book that uses such policies as consolidation to manage bank competition and instead focus on addressing the “too-big-to-fail” issue.

Lenders in advanced economies have high incentives to take risks and large banks have access to cheaper funding than smaller ones, according to an International Monetary Fund working paper published last week. Those banks need to shrink, said author Lev Ratnovski.