The notion that some banks are “too big to fail” builds on the premise that governments will offer support to avoid the adverse consequences of disorderly bank failures. However, this promise of support comes at a cost: large, complex or interconnected banks might take on more risk if they...

We argue that the defining feature of large and complex banks that makes their failures messy is their reliance on runnable financial liabilities that confer liquidity or money-like services that may be impaired or destroyed in bankruptcy. To make large bank failures more orderly, we advocate...

The notion that some banks are “too big to fail” builds on the premise that governments will offer support to avoid the adverse consequences of their disorderly failures. However, this promise of support comes at a cost: Large, complex, or interconnected banks might take on more risk if they...