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Discussion Paper

Evidence from the Bond Market on Banks’ “Too-Big-to-Fail” Subsidy


Abstract: Yesterday’s post presented evidence on a possible upside of very large banks, namely, lower costs. In today’s post, we focus on a possible downside, that is, whether investors in the primary bond market “discount” risk when they invest in bonds of the too-big-to-fail banks.

Keywords: Continental Illinois; large bank holding companies; largest banks; efficiency ratio; cost advantage; discount; nonbank financial institutions;

JEL Classification: G2;

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Bibliographic Information

Provider: Federal Reserve Bank of New York

Part of Series: Liberty Street Economics

Publication Date: 2014-03-26

Number: 201404326b