A credible threat of failure is an integral part of any industry. But this does not always apply to banks as failure may result in unacceptable economic costs. As a result, unprecedented amounts of public money have been used to avert bank failure. This column explains why the subsidy arises, why it is a public policy concern, and how it can be quantified.Read it at Vox.eu
The implicit subsidy of banks
by Joseph Noss, Economist, Bank of England, and Rhiannon Sowerbutts, Financial stability economist, Bank of England
1 comment:
If the implicit subsidy of CB funding has a £ cost, I wonder about the £ benefits of systemic stability that result from the concomitant bank regulation and the predictable price of credit available to consumers.
As Banking systems can not exist for long without CB funding and Gov regulation, I suspect these benefits will be as difficult to calculate as the subsidies were.
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