this post authored by Asani Sarkar
Once a bank grows beyond a certain size or becomes too complex and interconnected, investors often perceive that it is “too big to fail (TBTF), meaning that if the bank were to become distressed, the government would likely bail it out.
In a recent post, I showed that the implicit funding subsidies to systemically important banks (SIBs) declined, on average, after a set of reforms for eliminating TBTF perceptions was implemented. In this post, I discuss whether these subsidies increased again during the COVID-19 pandemic and, if so, whether the increase accrued to large firms in