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"Too big to fail" or "Too non-traditional to fail"?: The determinants of banks' systemic importance

Moore, Kyle and Zhou, Chen (2013): "Too big to fail" or "Too non-traditional to fail"?: The determinants of banks' systemic importance.

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Abstract

This paper empirically analyzes the determinants of banks' systemic importance. In constructing a measure on the systemic importance of financial institutions we find that size is a leading determinant. This confirms the usual "Too big to fail'' argument. Nevertheless, banks with size above a sufficiently high level have equal systemic importance. In addition to size, we find that the extent to which banks engage in non-traditional banking activities is also positively related to banks' systemic importance. Therefore, in addition to ``Too big to fail", systemically important financial institutions can also be identified by a "Too non-traditional to fail" principle.

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