Subbarao cautions against creating 'too-large-to-fail bank'

Amidst the ongoing talks of consolidating small state-run banks to create one or two globally large size banks, Reserve Bank governor D Subbarao today cautioned against making a 'too-large-to-fail' banks, saying what is needed is not a monopolist but a number of comparatively large banks.

Citing the 2008 credit crisis, which was triggered by too-big-to-fail banks, Subbarao said, "we don't need monopolies, instead we need four-five banks of big size, as large banks can become too-big-to fail, leading to moral hazard problems." He also said "too large banks lead to complexity and too-big-to-fail or too-connected-to-fail moral hazards with adverse impact on financial stability".

Read more >> Click here