[Blueboard] Too Big to Fail and Bail, yet Frail

Department of Economics [LS] economics.soss at ateneo.edu
Thu Feb 18 11:40:37 PHT 2016

The Ateneo Center for Economic Research and Development (ACERD) of the
Department of Economics would like to invite you to a talk by

*Dr. Luis F. Dumlao*

Chair, Department of Economics, Ateneo de Manila, 2012-2015

Ph.D., Fordham University


*Too Big to Fail and Bail, yet Frail*

on February 19, 2016, Friday, 4:00 to 5:00 pm,

at Case Study Room (G/F Social Sciences Bldg.)

*The recent financial crises have shown that the biggest banks in the US
and Europe have gotten too big to fail and bail yet frail. In relation to
this, the paper asks three questions in regards to the ten biggest banks in
the Philippines. (1) I**s a bank “too big to fail” in that if it fails, the
government will need to bailout the bank only to prevent the financial
system from getting into crisis? (2) **Is a bank “too big to bail” in that
if it fails, the cost of bailout would be too big that even the government
cannot afford it? (3) Is a bank “too big yet frail” in that its size makes
it seem strong but in contrast is comparatively frail? *

*The paper argues that each of the ten biggest banks are likely too big,
that if any individual bank fails the government can afford to bail it but
at a steep price, and that the reason why banks might fail in the first
place is that they are frail. The ultimate policy prescription is to raise
bank capital. More so, with foreign banks coming in, competition will
increase which will result in consolidation which will even increase the
need to raise capital. *
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