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What is a zombie bank? Definition and meaning - Market Business News marketbusinessnews.com - get the latest breaking news, showbiz & celebrity photos, sport news & rumours, viral videos and top stories from marketbusinessnews.com Daily Mail and Mail on Sunday newspapers.
It has long been understood that deposit guarantees and too-big-to-fail (TBTF) policies create a moral-hazard problem they incentivize banks to take on too much risk by shielding depositors and shareholders from losses in excess of equity (“left-tail” outcomes) in American banking.1 Congress passed the Federal Deposit Insurance Corporation Improvement Act (FDICIA) in 1991 to mitigate the moral-hazard problem by restricting forbearance and implicit subsidies for undercapitalized banks. ....