“Blistering complaints that banks are too big to fail are usually heard from the Occupy Wall Street side of the barricades.”
“But on Thursday, some bank analysts in the City of London weighed in with their own hard look at the threats posed by Europe’s largest lenders. The analysts, who work at the Royal Bank of Scotland, argue that despite recent efforts to overhaul the financial system, European taxpayers may still have to fork out huge sums to rescue the Continent’s banks in a crisis.”
“‘Europe’s banks are stronger but still too large, and sovereigns remain vulnerable to bank risk,’ the analysts wrote in a research note.”
“The phrase “too big to fail” refers to the belief that some banks are so large that the government would have to bail them out to prevent their collapse from dragging down the wider economy. The authorities of course acted in this way during the 2008 financial crisis. Since then, governments have taken steps that they say will enable them to wind down large banks, and avoid bailing them out, when they get into trouble in the future. But because banks remain so large compared to national economies, skeptics doubt the authorities would actually let them fail in a future meltdown.”
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