How To Deal With Failed Banks

2019-03-14T09:56:10-04:00July 3, 2018|

By Deniz Igan

July 3, 2018

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Reforms since the global financial crisis have made bail-ins a credible option and bail-outs less likely (photo: iStock by Getty Images)

During the global financial crisis, policymakers faced a steep trade-off in handling bank failures. Using public funds to rescue failing banks (bail-outs) could weaken market discipline and lead to excessive risk taking—the moral hazard effect. […]