New York Fed study finds TBTF banks take on more risk
Banks that can rely on government support make riskier loans
An attempt to measure the moral hazard involved in being ‘too big to fail' (TBTF) has found banks that can probably rely on government support do indeed take on more risk.
A new paper from the New York Fed – part of a series on large, complex banks launched this week – uses a device invented by Fitch Ratings called the support rating floor (SRF), which isolates potential sovereign support from other sources of external support, as a measure of likely government support.
The paper: Do "too-big-to
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