12 06finance

JustHowBigIstheTooBigtoFailProblem?
JamesR.Barth
LowderEminentScholar,AuburnUniversity
SeniorFinanceFellow,MilkenInstitute
Fellow,WhartonFinancialInstitutionsCenter
jbarth@milkeninstitute.org
Apanard(Penny)Prabha
Economist,MilkenInstitute
pprabha@milkeninstitute.org
PhillipSwagel
Professorininternationaleconomicpolicy,theMarylandSchoolofPublicPolicy
SeniorFellow,MilkenInstitute.
pswagel@umd.edu
March27,2012
Abstract
Theideaofbankstoobigtofail(TBTF)isnotnew.Indeed,ithasbeenthreedecades
sincethefirstTBTFbailoutduetoconcernsaboutseriousandwidespreadfinancial
repercussions.Sincethen,ofcourse,bigbankshavegrownmuchbiggerandhavebecome
increasinglycomplex,bothintheUnitedStatesandelsewhere.Inthispaper,weputtheissue
oftoobigtofailinU.S.historicalandquantitativeperspective,andassessthepotentialimpacts
ofrecentregulatorychanges.ThedevelopmentsrelatingtotheTBTFproblembasedonaglobal
perspectivearealsoexamined.Themeasurestakensincethefinancialcrisisof20072009
includingtheBaselIIIregulatoryreforms,domesticregulationsliketheDoddFrankAct,andthe
designationofglobalsystemicallyimportantbankshavedistinctpurposesbutalso
complementoneanother,totheextentthattheyaresuccessful.Ouranalysispointsoutthat
despitetherecentregulatorychangesthefutureofTBTFremainsunclear,butitislikelythatit
willbedifferentfromthepast.
JELClassifications:G2,G21,G28
Keywords:banks,financialfirms,financialcrisis,toobigtofail,DoddFrankAct,BaselIII
*TheauthorsaregratefultoJakobThomas,KumikoGreenandNan(Annie)Zhangforexcellentresearch
assistance.
Correspondingauthor:MilkenInstitute,1250FourthStreet,SantaMonica,CA90401.Phone:(310)5704678,Fax:
(310)5704625,Email:jbarth@milkeninstitute.org
JustHowBigIstheTooBigtoFailProblem?
Introduction
During the financial crisis of 20072009, governments worldwide took extraordinary
measurestopreventthefailureoflargefinancialinstitutions.Policymakersclearlyconsidered
some of them too big to fail (TBTF). At different times and across various countries and
economicconditions,theyprotectedbothinsuredanduninsureddepositors,guaranteedbank
debt,insuredriskyassets,providedliquidityforexceptionallylongperiodsandagainstcollateral
of depressed value, and injected public capital to the benefit of shareholders of banks that
wouldotherwisehavefailed.
Tobesure,manyshareholderssufferedlargelossesdespitethatsupport(andinsome
cases, because of it). But governmental intervention made losses infrequent among the
bondholdersandothercreditorsatsystemicallyimportantfinancialinstitutions.Ifanything,the
market disruptions that followed bondholder losses at Lehman Brothers and Washington
Mutual (WaMu) made governments even more reluctant to allow similar failures during the
crisis.1 Meanwhile, hundreds of smaller banks were allowed to fail, with their shareholders
wiped out and creditors and uninsured depositors taking losses, in some cases through the
normalresolutionprocess.
The resolution authority of the DoddFrank Wall Street Reform and Consumer
Protection Act (DoddFrank), which became law in July 2010, formalizes the idea that the
largest banks will be regulated differently from smaller ones, to eliminate any special or
deferentialtreatment.Thenewlawincludesnotonlyadifferentregulatoryregimefornormal
timesbutalsoanewresolutionauthoritytobeinvokedincaseofaseriousproblem,andthat
allowsregulatoryauthoritiestosupportalargefinancialinstitutionthatfacesinsolvencywhile
imposinglossesonitscreditorsandshareholders.Thus,itcouldallowbigbankstofailwithout
leadingtoseverenegativespilloversamongotherfirmsthoughthekeywordiscould,since
theauthorityisyetuntested.
1.ItturnsoutthatWaMubondholdersasofMarch2012werelikelytorecoverallornearlyalloftheirvalueinthe
end,asaresultoflitigation.Thissuggeststhatsomeofthemarketturmoilthatensuedfromtheresolutionof
WaMumighthavebeenavoidable.
Evenso,DoddFrankconstitutesapotentialseachangeforlargefinancialinstitutions.
Creditorsnowunderstandthatitispossible,evenmorelikely,thattheywilltakelossesifthe
firm fails. This in turn should increase financing costs for large financial institutions even in
normal times, removing one source of their funding advantage over smaller banks: the
presumption that being TBTF meant that regulators would make good on the debts of the
largest banks; thus, bondholders were willing to fund them at a lower cost than they would
smallerinstitutions.Thisisnolongerasobviousgoingforward.
Moreover, large financial institutions face new regulatory burdens and other more
stringentrequirementsforcapitalandliquiditythatraisethecostofbeingbig.Andthisison
top of the recent move by the Federal Deposit Insurance Corporation (FDIC) to charge
insurancepremiumsonbanksnondepositliabilitiesotherthancapital.Thus,largebanksthat
relyonborrowingratherthandepositswouldhavetopaydepositinsurancepremiums,evenon
uninsuredliabilities.
Thesechangespromisetoredefinetheplayingfieldforlarge,interconnectedfinancial
companies (LIFCs), which DoddFrank identifies as banks/bank holding companies with $50
billion or more in assets. On a global level, the G20 member countries and the Financial
StabilityBoard (FSB) in November2011 identified an initial group of 29 banks assystemically
important financial institutions (GSIFIs), to be subjected to more stringent prudential
standards.Atthesametime,theBaselCommitteeonBankingSupervision(BCBS)setforthan
additional capital requirement for global systemically important banks (GSIBs).2 Other
regulatoryreformsremainworksinprogress,includingimplementationofDoddFrankandthe
BaselIIIstandards.Stillmoremeasures,suchaseffortstowardinternationalcoordinationofthe
bankruptcyofmultinationalbanks,alsoremaintobeimplemented.Thefutureoftoobigtofail
remainsunclear,butitislikelythatitwillbedifferentfromthepast.
Thispaperputstheissueoftoobigtofailinhistoricalandquantitativeperspective,and
assessesthepotentialimpactsofrecentregulatorychanges.Bothanunderstandingofhowthe
TBTFproblemhasevolvedandaconsiderationofquantitativemeasuresforbanksizeareuseful
2. The GSIBs will be grouped into different categories of systemic importance to determine the minimum
additional loss absorbency (common equity as a percentage of riskweighted assets), with the recommended
additional capital ranging from a low of 1 percentage point to a high of 3.5 percentage points (for additional
information,seehttp://www.bis.org/publ/bcbs207.htm).
forconsideringthepotentialimpactsofDoddFrankandotherregulatoryandfinancialsystem
changes. Accordingly, the next section reviews historical developments in the United States.
The third section continues those developments relating to TBTF in the context of the U.S.
financialcrisisof20072009.3ThefourthsectionprovidesquantitativemeasuresforU.S.banks
thatonemightconsidertoobigtofail,aswellasbanksidentifiedbyregulatoryauthoritiesas
nolongerTBTF.ThefifthsectionreviewsdevelopmentsrelatingtotheTBTFproblembasedon
aglobalperspective,aswellasquantitativemeasuresonemightusetoassesswhetherabank
istoobigtofail.ThepaperthenusesthosemeasuresforthelistofbanksidentifiedasTBTFby
internationalauthorities.Thefinalsectiondiscusseswhetherindeedbankbignessisaserious
problemand,ifso,howtoaddressitinthecontextofrecentmarketandpolicydevelopments.
Thisproblemoftoobigtofailisnotnew.Thetermitselfdatesbackto1984,whenthe
FDICtookovertheContinentalIllinoisNationalBankandTrustCompany(ContinentalIllinois),
then the seventhlargest U.S. bank (Feldman and Rolnick, 1998). Continental Illinois
shareholders were wiped out, but uninsured depositors and creditors were made whole, or
shieldedfromlosses,makingthegovernmentactionabailoutoftheseparties.Then,asnow,
the true bailout in most financialsector interventions was for the creditors, not the equity
holders.
C.T. Conover, Comptroller of the Currency at the time, explained the government
bailout by noting that had Continental failed and been treated in a way in which depositors
and creditors were not made whole, we could very well have seen a national, if not an
international,financialcrisisthedimensionsofwhichweredifficulttoimagine(Conover,1984,
p.288).WhenaskedbyBankingCommitteeChairmanFernandSt.Germainatacongressional
hearing,Doweallow,ever,alargebanktofail?hereplied,Ithinkitisimportantthatwefind
awaytodothat(1984,p.300).
In the three decades between the rescue of Continental Illinois and the widespread
rescues of 2008 and 2009, big banks grew bigger and the financial system became more
complicated,bothintheUnitedStatesandaroundtheworld.Yetdespitethesedevelopments,
noregulatorymeasureswereimplementedthatwouldallowdeeplytroubledbigbankstofail.
3. For a discussion of the TBTF problem in the context of responses to the global financial crisis by several
Europeancountriesduringthisperiod,seeMullineux(2012).
I.TheOriginsofTBTFintheUnitedStates
Banks play a central role in the economy by providing credit to individuals and
businesses,andofferingservices,suchasdeposits,andbyfacilitatingpaymentsforgoodsand
services. If its depositors withdraw their funds on the belief that the bank is on the verge of
insolvency, it could be forced to sell off its assets at fire sale prices, thereby turning an
illiquidity problem into a solvency problem. Such a run could trigger similar runs on other
institutionsanddrivethemallintoinsolvency.Thisstateofaffairscouldleadtoadisruptionin
the payments system and a tightening of available credit, with an adverse macroeconomic
impact.
To address issues of systemic risk in the banking system, Congress established the
Federal Reserve in December 1913. A major purpose of the Federal Reserve was to act as a
lenderoflastresortbyprovidingfundstosolventbanksexperiencingliquidityproblems.These
loansweretobemadeagainstgoodcollateral,definedbytheFederalReserveActassecured
tothesatisfactionoftheFederalReserve.Twentyyearslater,inJune1933,Congresscreated
the FDIC, its purpose being to guarantee deposits, up to a limit, to lessen the incentive of
depositorstomakepanickedwithdrawalsandtherebytoreducethelikelihoodofbankruns.
Priortotheestablishmentofthesetwofederalinstitutions,U.S.bankssufferedthrough
several periods of runs, with dire financial consequences. Although the Federal Reserve had
alreadybeeninexistencefornearlytwodecades,theworstsuchperiodwasduringtheGreat
Depression,demonstratingthattheFedbyitselfcouldnotpreventbankruns4andpavingthe
way for creation of the FDIC. But even before the FDIC was up and running, the government
had been forced to address widespread problems that existed in the banking industry during
19291933.5Thus,inJanuary1932,CongresscreatedandcharteredtheReconstructionFinance
4. Todd (1992, p. 24) points out that [p]rior to 1932, the Federal Reserve Banks were not authorized to make
advancesagainstassetsotherthanrealbillsorgovernmentsecurities,andtheycouldlendfornolongerthan15
daysonthegovernmentsecuritiesownedbymemberbanks.
5.Itisinterestingtonotethat,accordingtoKaufman(2002,p.425),Beforetheintroductionofdepositinsurance
in1934,verybigbanksdidnotoftenbecomeinsolventandfail,eveninperiodsofwidespreadbankfailuresand
macroeconomicdifficulties,suchas1893,1907,andtheearly1930s.
Corporation(RFC)6tomakeloanstobanksandfinancialinstitutions whichcannototherwise
securecreditwheresuchadvanceswillprotectthecreditstructureandstimulateemployment
(Todd, 1992). The Emergency Banking Act of March 1933 further authorized the RFC to
purchasepreferredstockissuedbybanksinneedofcapitalfororganizationorreorganization
(Federal Reserve Bulletin, 1933, and Final Report on the Reconstruction Finance Corporation,
SecretaryoftheTreasury,1959).7
Some of the RFCs actions, especially those with respect to the purchase of preferred
stock, represented the first government bailouts of banks to address broader credit and
economicproblemsarisingfromthefinancialsector.8BeginninginMarch1933andcontinuing
until1945,theRFCpurchasedthepreferredstockof4,202banks(FinalReport,1959).Toput
these numbers in perspective, it should be noted that roughly 9,000 of about 25,000 banks
failedduringthe1930s,withnearlyhalfofthefailuresoccurringin1933alone.Didbigbanks,
perhaps considered too big to fail, receive special treatment with respect to the bailouts?
According to Todd (1992, p. 26), [a]lmost all large banks ... funded themselves through the
RFC. This suggests that most of the banks that failed or were allowed to fail during and for
severalyearsafter1933weresmallbanks.9
Once the FDIC was in operation, it assumed responsibility for dealing with failed and
failing banks. Until 1950, the agency had only two options available to it under the Federal
Deposit Insurance Act (FDIA): (1) to liquidate a bank and pay off insured depositors or (2) to
arrangeforthebanksacquisitionbyahealthybank.TheFDICwasrequiredtochoosetheless
costlyofthetwo.In1950,however,CongressauthorizedtheFDICtoinfusefundsintoabankto
keep it open. The FDIC had sought this authority out of concern that the Federal Reserve
would not be a dependable lender to banks faced with temporary funding problems (FDIC,
6.TheTreasuryDepartmentprovidedtheRFCwith$500millionincapital.Itwasalsoallowedtoborrowfunds,but
the outstanding amount was not to exceed three times its capital (Final Report on the Reconstruction Finance
Corporation,1959).
7. This authority expired in June 1947, when the applicable provision of the Emergency Bank Act was repealed
(FinalReportontheReconstructionFinanceCorporation,1959).
8.Ofcourse,notallofthefundswereusedbytheRFCtobailoutbanks.Fundswerealsomadetoconservators,
receivers,orliquidatingagentstoaidintheliquidationofclosedbanks(FinalReportontheReconstructionFinance
Corporation,1959).
9.Kaufman(2002)alsoprovidesevidencetosupportthispoint.AtleastonelargebankBankofUnitedStates
failedbeforetheestablishmentoftheFDIC;indeed,the1930failureofthisinstitutionisoftenseenascontributing
tothebroaderpanicthattookholdattheendof1932andinto1933.
1984,p.94).Butsuchopenbankassistancewasonlypermittedwhenintheopinionofthe
[FDICs] Board of Directors the continued operation of such a bank is essential to provide
adequate banking service in the community (FDIC, 1984, p. 94). When this essentiality
condition was invoked, the FDIC could ignore the requirement to choose the less costly
resolutionmethod.10
BeforetherescueofContinentalIllinoisin1984,essentialitywasusedjustfivetimes,11
andinonlyoneofthesecaseswastheFDICsdeterminationofessentialitybasedmainlyonthe
sizeofthebank.Thiscase,in1980,involvedFirstPennsylvania,whichwasthenations23rd
largest bank at the time.12 The FDIC concluded that closing such a large bank would have
seriousrepercussionsinboththelocalmarketandprobablytheentirenation.13Thisappearsto
bethefirstbanktheFDICconsideredtoobigtofail.14
Asnotedearlier,thegovernmentdefendedits1984bailoutofContinentalIllinoisciting
concerns about systemic risk due to the banks size. The essentiality condition was therefore
invokedtoenableopenbankassistance,underwhichtheFDICinfused$1billioninnewcapital
10.SeeFDIC(1997,p.248).Morespecifically,accordingtotheFDIC(1997),Alsoafter1950,anduntilthepassage
oftheFederalDepositInsuranceCorporationImprovementActof1991,theFDICoperatedunderacosttestfor
determiningwhichmethodtouse:itwasrequiredtoestimatethecostofapayoffandliquidationasthestandard
ofcomparison,andcouldadoptanalternativeresolutionifthealternativewasexpectedtobelesscostlythanthe
standard. But the FDIC was also allowed to use an alternative method under the essentiality provision, and the
statutorylanguagewassufficientlygeneraltoprovidetheFDICwithdiscretiontoextendessentialitybeyondlocal
economicdislocation(aswasdonewithContinental).Whenessentialitywasinvoked,costconsiderationscouldbe
ignored. In addition, the FDICIA as enacted essentiallytook this road, attempting to place limits on regulatory
activitiesassociatedwithTBTFbutstillleavingregulatorstheabilitytoinvokeitundercertaincircumstances.FDIC
resolutions were now required to proceed according to a leastcost test, which would mean that uninsured
depositorswouldoftenhavetobearlosses.
11.InthecaseoftheFranklinNationalBank,the20thlargestbankin1974,alldepositorswerefullyprotectedand
theFederalReservedidprovideadvancestoitduetoenormousdepositoutflows.Indeed,bythetimethebank
wasclosed,itsborrowingsfromtheFederalReservehadreached$1.7billion.Theseborrowingswererepaidbythe
FDIC. Franklin, however, was treated as a purchase and assumption, and not considered to have received open
bankassistanceunderessentiality(FDIC,1997).
12. The other four banks supported under essentiality were Unity Bank and Trust in 1971, Bank of the
Commonwealthin1972,AmericanBankandTrustCompanyin1974,andFarmersBankoftheStateofDelawarein
1976.
13.SeeFDIC(1997)foramoredetaildiscussionofthisissue.ThefirstofthefivebanksbailedoutwasUnityBank
inBostonin1971.
14. It should be noted that, according to the New York Times, The toobigtofail doctrine, sometimes called
T.B.T.F.,goesbackatleastasfarasBrandeistime,when,in1914,theTreasurysteppedintoprovidefinancialaid
toNewYorkCity.Inthe1980s,whenthegovernmentrescuedContinentalIllinoisBank,StewartB.McKinney,a
ConnecticutCongressman,declaredthatthegovernmenthadcreatedanewclassofbanks,thosetoobigtofail.
Thephrasereturnedandstuck(http://www.nytimes.com/2009/06/21/weekinreview/21dash.html).
into Continental Illinois Corporation, the banks holding company, in exchange for preferred
stock convertible to 80 percent of the equity.15 These funds were then downstreamed to
Continentalasequitycapitaltorecapitalizethebank.Inadditiontothefinancialassistance,the
FDICprovidedtheassurancethatalluninsureddepositorsandcreditorsofContinentalwould
be protected.16 The resolution of that troubled bank focused far greater attention on the
question as to whethercertain banks or bankholding companies were indeed too big to fail.
ThereasonforContinentalsbailout,asnotedearlier,wasprovidedbyComptrollerConoverin
theresponsetoaquestionbyChairmanSt.Germainaboutwhetherhecouldeverforeseeone
of the 11 multinational money center banks failing. Conover replied, I admit that we don't
haveawayrightnow.Andso,sincewedon'thaveaway,yourpremiseappearstobecorrectat
themoment(Conover,1984,pp.299300).
Conover did not identify particular banks, but these firms were easily namedas the
WallStreetJournaldidinlistingthe11largestbanksatthetimethosethereforeconsidered
toobigtofail(seetable1).17Thesebigbanksaccountedfornearlyonethirdofthetotalassets
15.AsregardsthewayinwhichthegovernmentbailedoutContinental,Conoverwrote:Wehadtwooptions.We
couldputcapitalintheformofdebtdirectlyintothebank.Wecouldntputpreferredstockintothebankbecause
therewerecovenantsinthebondindenturesoftheholdingcompanywhichsaidyoucouldntdothatunlessyou
hadthepermissionofthebondholders.Inthiscase,theywereholdersofbearerbondswhichhadbeensoldin
Europe. Since we didn't have a chance of getting the bondholders approval, the FDIC could not have acquired
preferredstockinthebank.Itsonlyalternativewastoputdebtintothebank.
Thedisadvantageofputtingdebtintothebankwasthatwewouldhaveendedupwithaverystrangelooking
balancesheet.Therewouldhavebeenalittlebitoftheremainingshareholdersequityandabigpileofdebt.We
figuredthatitwasnotgoingtohelpthebankrecoverasitpublisheditsquarterlyfinancialstatementstohavea
balancesheetthatdidntlooklikeabankbalancesheetoughttolook.
So we considered the other optionbuying preferred stock in the holding company and having the holding
company downstream it into the bank in the form of common stock equity. That satisfied our goal of having a
sound looking bank balance sheet when the banks financial statements were published. It had the undesirable
featureofproppinguptheholdingcompanybondholdersandcommercialpaperholders.
Weknewthatatthetime,andtherewassignificantdebatebackandforthaboutwhichwasthepreferableway
togo.TheTreasuryDepartmentfelt,andseveralmemoswerewrittentoMr.VolckerandMr.Isaacandmyself,
thatthealternativeofputtingdebtintotheholdingcompanywasthepreferableonebecauseyoucouldalways
sayOh,look,theFederalGovernmentisstandingbehindthisbank,anyway.Ifeltandmyfellowdirectorsatthe
FDICfeltandMr.Volckerfeltthattheappropriatewaytogowasthewaywewentbuyingpreferredstockinthe
holdingcompany(Conover,1984,p.302).
16.ForamoredetaileddiscussionofContinental,seeKaufman(2002),Shull(2010),FDIC(1997)andFDIC(2003).
17.SeeWallStreetJournal(1984).
in the banking industry at the end of 1983. Notice that the criterion emphasized to identify
banksastoobigtofailwassimplyassetsize.18
Table1:Elevenbanksconsideredtoobigtofailatyearend1983
Bank
Citibank
Location
Totalassets
(US$millions)
NewYork
104,392
San
2
BankofAmerica
104,085
Francisco
3
ChaseManhattanBank
NewYork
72,956
4
MorganGuarantyTrust
NewYork
54,368
5
ManufacturersHanoverTrust
NewYork
54,321
6
ChemicalBank
NewYork
45,956
39,811
7
ContinentalIllinoisNationalBank&Trust Chicago
8
BankersTrust
NewYork
36,949
9
SecurityPacificNationalBank
LosAngeles
34,329
10 FirstNationalBankofChicago
Chicago
33,505
San
11 WellsFargoBank
23,390
Francisco
U.S.totalcommercialbankassets
2,018,593
Sources:WallStreetJournal,TheBanker,FederalReserve,MilkenInstitute.
%ofU.S.
totalbank
assets
Cumulative
assetsas%of
U.S.totalbank
assets
5.2
5.2
3.6
2.7
2.7
2.3
2.0
1.8
1.7
1.7
1.2
30.1
10.4
14.0
16.7
19.4
21.7
23.7
25.5
27.2
28.9
30.1
30.1
InthecaseofContinental,itwastheholdingcompanythatwasbailedout;therefore,
theholdingcompaniesassociatedwitheachofthe11bigbanksarelistedintable2.Asmaybe
seen, the vast majorityof the holding companies assets were their subsidiary banks, ranging
from a low of 83 percent to a high of 100 percent. Thus, in most of these cases, any action
takentorescuethebankholdingcompanywouldnotencompassarelativelylargepercentage
ofassetsbeyondthoseofthesubsidiarybank.Thesituationhaschangedquitesignificantlyin
recent years, with the repeal of the GlassSteagall Act19 and the expansion of banks into
18.TBTFspecificallydefinedastheinvocationoftheessentialityclausewithregardtoaninstitutionwasusedonly
threetimesbetweentheresolutionsofContinentalandtheBankofNewEnglandCorporationinJanuary1991.In
thelattercase,theFDICextendedguaranteestoalluninsureddepositorsandtwoaffiliatedbanks.Thejustification
wasthatthecontinuedoperationofthethreebankswasessentialtoprovideadequatedepositoryservicesintheir
respective communities until an acquirer could be found. These three banks were ultimately taken over by the
FDICandsoldtoFleet/NorstarFinancialGroup(seeShull,2010).Thefocusofthispaperisonopenbankassistance
tobanksdeemedtoobigtofail.
19.TheGlassSteagallActseparatedcommercialfrominvestmentbankingin1933andwasrepealedin1999.
broader activities, such as investment banking, marketmaking, and fullservice asset

management.
Table2:Holdingcompaniesof11bigbanksconsideredTBTFatyearend1983
Bank
name
1 Citibank
2 BankofAmerica
3 ChaseManhattanBank
4 MorganGuarantyTrust
5 ManufacturersHanoverTrust
6 ChemicalBank
7 ContinentalIllinoisNationalBank&Trust
8 BankersTrust
9 SecurityPacificNationalBank
10 FirstNationalBankofChicago
11 WellsFargoBank
Sources:TheBanker,MilkenInstitute.
BHC
name
Citicorp
BankAmericaCorp.
ChaseManhattanCorp.
J.P.Morgan&Co.
ManufacturersHanoverCorp.
ChemicalNewYorkCorp.
ContinentalIllinoisCorp.
BankersTrustNewYorkCorp.
SecurityPacificCorp.
FirstChicagoCorp.
WellsFargo&Co.
BHCs
assets
(US$
millions)
Bank
assetsas
%of
BHCs
assets
125,974
115,442
75,350
56,186
60,918
47,789
41,238
36,952
38,613
34,871
26,522
82.9
90.2
96.8
96.8
89.2
96.2
96.5
100.0
88.9
96.1
88.2
ThenextimportantdevelopmentintheTBTFsagaoccurredwiththeenactmentofthe
FDIC Improvement Act (FDICIA) in December 1991.20 Changes made in FDICIA were heavily
influenced by the savings and loan crisis of the 1980s, during which regulators extended
substantial forbearance to struggling banks, resulting in the expansion of taxpayer costs to
coverthebadloansmadebysavingsandloans.21AccordingtoShull(2010),thelawlimitedthe
FDICs ability to provide open bank assistance for essential banks by requiring that it receive
concurrence from the Federal Reserve and the Treasury secretary, and consult with the
president. The law also placed new constraints on Federal Reserve loans to undercapitalized
banks.22Moreover,FDICIArequiredfederalbankingregulatorstotakepromptcorrectiveaction
toidentifyandaddresscapitaldeficienciesatbanksinordertominimizeFDIClosses.
20.Itshouldbenotedthatinthelate1980sinsomecases,theFDICprotectedalldepositorsandcreditorsofa
bank, while letting the parent holding company file for bankruptcy (e.g., First National Bank of Oklahoma City
versusitsholdingcompany,thefirstOklahomaCorporation).
21.See,forexample,Barth(1991).
22.Also,seeKaufman(2002,pp.427428).
10
At the same time, however, FDICIA provided for a systemic risk exception to the
requirement that the FDIC resolve troubled institutions using the less costly alternative. The
exception was to be based upon the determination that the failure of an insured depository
institution would have serious adverse effects on broader economic conditions or financial
stability.23 Thus, FDICIA replaced the FDIAs essentiality condition with the systemic risk
exception,althoughwithasetofhurdlesclearlymeanttolimititsuse.
II.TheU.S.FinancialCrisisof20072009andTooBigtoFail
Fromlate1991tothesummerof2008,thesystemicriskexceptionwasnotinvokedby
the regulatory authorities. Things changed in the fall of 2008, however. According to Hurley
(2010, p. 371), it was then that [o]ut of concern for the effects of a possible failure, on
September29,theFDICactedforthefirsttimeunderthesystemicriskexceptionofthe1991
FDICIA and ordered Wachovia to sell itself to Citigroup. Under the agreement initially made
betweenCitigroup,Wachovia,andtheFDIC,Wachoviascreditorsweretobeprotectedandthe
FDIC would take on some of the banks potential losses in exchange for preferred stock and
warrants in Citigroup. The transaction was heavily motivated by the experience with
WashingtonMutualashorttimeearlier,inwhichtheFDIChadimposedunexpected,butlegal,
losses on WaMus creditors, leading to an immediate spillover of funding pressures on other
banks, including Wachovia, that were seen as risky. Wachovia eventually stepped away from
thedealwithCitigroupandsolditselftoWellsFargowithoutFDICassistance.24Thisfirstever
useofthesystemicriskexceptionwastorepresentanopeningofthefloodgates.
At the time of the Wachovia failure, the United States was experiencing its worst
financial crisis since the Great Depression.25 As part of a broad response, the October 2008
Emergency Economic Stabilization Act (EESA) authorized the secretary of the Treasury, under
theTroubledAssetReliefProgram(TARP),to spendupto$700billiontopurchaseandinsure
23. The determination was to be made by the Board of Directors of the FDIC, the Board of Governors of the
FederalReserve,andthesecretaryoftheTreasury(inconsultationwiththepresident).
24.Formoredetail,seeHurley(2010).
25.Fordiscussion,seeBarthetal.(2009),andSwagel(2009),amongmanyothers.
11
distressedassets.Thesepurchaseswereexpectedtoconsistofmortgagebackedsecurities,but
in the end TARP was used mostly to make capital injections into banks and other firms
(eventually including insurance companies and automakers; other TARP funds were spent on
foreclosure relief).26 Under TARPs Capital Purchase Program, 707 banks received capital
injections from the government, amounting to $245 billion (see figure 1). Of these banks, 32
wereamongthe50biggestbanksintheUnitedStatesinthefourthquarterof2011.27American
InternationalGroup(AIG),GeneralMotors,andChrysleralsoreceivedcapitalinjections,while
auto parts suppliers received guarantees. Fannie Mae and Freddie Mac received government
capitalinjectionsamountingto$180.4billionasofearly2012undertheHousingandEconomic
RecoveryActof2008(HERA).
Figure1:TotalgovernmentcapitalinjectionstoU.S.financialinstitutions:US$425.4billion28
26.Thecapitalinjectionswereundertakenintheformofpreferredandeventuallycommonstockinbanks.These
wereseenaspurchasesoftroubledassets,thoughofequityratherthanmortgagebackedsecurities(MBS).
27.SeeAppendix1forinformationonthe50biggestbanksintheUnitedStatesandAppendix2forinformationon
the39financialinstitutionsthatreceivedthelargestcapitalinjections.
28.Ofthetotaldisbursed,thegovernment,asofAugust31,2011,hasreceivedbackatotalof$314billion,
representingaboutthreefourthsofallTARPinvestments.Also,forthebankingprogram,$226billionoutof$245
billionhasbeenrepaid(http://www.treasury.gov/initiatives/financialstability/briefing
room/news/Documents/TARP%20Three%20Year%20Anniversary%20Report.pdf).
12
Total government capital injection to U.S.

banks (excluding AIG, Fannie Mae, and
Freddie Mac): US$245 billion
Total government capital injection to U.S.

financial institutions: US$425.4 billion
AIG, 16%
Other 675
32 of the
received
50 biggest
bailouts,
banks as
11%
of Q4 2011
that
received
bailouts,
52%
Fannie
Mae, 14%
Freddie
Mac, 12%
Other 675
received
bailouts,
6%
32 of the
current 50
biggest
banks as
of Q4 2011
that
received
bailouts,
89%
Note:Theother675referstoalltypesoffinancialinstitutionsthatreceivedfinancialassistancefromthe
government.Theperiodcoveredforcapitalinjectionsis20082009.
Sources:U.S.TreasuryDepartment,MilkenInstitute.
Thefactthat89percentoftheTARPscapitalpurchaseprogramfundswentto32big
banks,29 while the other 11 percent went to the 675 smaller institutions, again focused
substantialattentionontheTBTFissue.Indeed,eventheFederalReserve(2012)stated:
Asaresultoftheimprudentrisktakingofmajorfinancialcompaniesand
the severe consequences to the financial system and the economy
associated with the disorderly failure of these interconnected
companies,theU.S.government(andmanyforeigngovernmentsintheir
home countries) intervened on an unprecedented scale to reduce the
impactof,orprevent,thefailureofthesecompaniesandtheattendant
consequences for the broader financial system. Market participants
before the crisis had assumed some probability that major financial
companies would receive government assistance if they became
troubled. But the actions taken by the government in response to the
crisis,althoughnecessary,havesolidifiedthatmarketview.
TheFederalReservewentontopointoutthat:
Themarketperceptionthatsomecompaniesaretoobigtofailposes
threats to the financial system. First, it reduces the incentives of
shareholders, creditors and counterparties of these companies to
discipline excessive risktaking. Second, it produces competitive
distortions because companies perceived as too big to fail can often
fundthemselvesatalowercostthanothercompanies.Thisdistortionis
29.These32bankswerealsoamongthebiggestbanksintheUnitedStateswhentheyreceivedcapitalinjections.
13
unfair to smaller companies, damaging to competition, and tends to

artificially encourage further consolidation and concentration in the
financialsystem.
Inresponsetothesedevelopments,BenjaminBernanke(2010),ChairmanoftheFederal
ReserveBoard,statedthatifthecrisishasasinglelesson,itisthatthetoobigtofailproblem
mustbesolved.
AmajorgoalofDoddFrankandotherpostcrisisregulatorychangeswastomitigatethe
threattofinancialstabilityposedbybanksperceivedastoobigtofail.30Toaccomplishthisgoal,
the Federal Reserve proposed implementing enhanced prudential standards and early
remediationrequirementsforthelargestcomplexBHCs.Theserequirementstogetherimpose
considerable charges and constraints on the behavior of large banks and include requiring
them:
(1)todemonstratetheirabilitytomaintaincapitalaboveexistingminimumregulatory
capitalratios,andaboveaTier1commonequityratioof5percent,underbothexpectedand
stressed conditions over a minimum ninequarter planning horizon, as well as to satisfy a
quantitative riskbased capital surcharge based on Basel Committee on Banking Supervision
(BCBS)guidelines;
(2) to comply with enhanced liquidity riskmanagement standards, including liquidity
stresstesting,aswellaswiththeenhancedliquidityrequirementsfortheGSIBsofBaselIII.
(3)tonothaveacreditexposuretoanyunaffiliatedcompanythatexceeds25percentof
itscapital;
(4) to maintain a debttoequity ratio of no more than 15:1, but only upon a
determinationbytheFinancialStabilityOversightCouncil(FSOC)that(a)suchcompanyposesa
grave threat to the financial stability of the United States and (b) the imposition of such a
requirementisnecessarytomitigatetheriskthatthecompanyposestoU.S.financialstability;
(5)tobesubjectedtoearlyremediationinfinancialdistress,includingforemergingorpotential
issues,beforetheydevelopintolargerproblems.
30.Inparticular,DoddFrankrequirestheFederalReservetoimposeapackageofenhancedprudentialstandards
onbankholdingcompanieswithtotalconsolidatedassetsof$50billionormore,andnonbankfinancialcompanies
theFinancialStabilityOversightCouncil(FSOC)hasdesignatedforsupervisionbytheFederalReserve(together,
coveredcompaniesandeachacoveredcompany)(FederalReserve,2012).
14
IntheeventthatoneoftheseBHCsencountersfinancialdifficultyandearlyremediation
effortsfail,theFederalReserveistorecommendtotheTreasuryDepartmentandtheFDICthat
the company be resolved under its new orderly liquidation authority. This means that the
companywouldbeplacedintoFDICreceivership.ThisistohappenifthesecretaryofTreasury,
inconsultationwiththepresident,determinesthatthecompanyisindefaultorindangerof
default; the default of the financial company would have a serious adverse effect on the
financial stability of the United States; no viable privatesector alternative is available to
prevent the default; the effect on the claims or interests of its creditors, counterparties, and
shareholders, and other market participants is appropriate, given the impact that any action
would have on the financial stability of the United States; and an orderly liquidation would
avoidormitigatesuchadverseeffects.
Oncetheorderlyliquidationauthorityisinvoked,theFDICcanputtaxpayerfundsinto
thecompanytokeepitafloatforalimitedperiod(whichcanbelengthy,justnotindefinite)and
has broad authority to change contracts and impose losses on creditors. Any resources
deployed by the FDIC must be collateralized by the assets of the firm in liquidation, and any
eventual losses beyond the available assets are to be borne by creditors through an expost
clawback provision from bondholders. If the losses exceed what can be imposed on
bondholders, then other financial firms will be assessed to cover the additional amount of
lossesinnocaseisthegovernmentallowedtobearthecostsofliquidationwithoutfurther
congressional authorization. As a result of the FDICs orderly liquidation authority, the
government at long last is trying to resolve the too big to fail problem. To reenforce this
point,DoddFrankseekstoeliminateopenbankassistancebyprohibitingtheFDICfromtaking
anequityinterestinorbecomingashareholderofanysuchcompany.
A reasonable expectation is that the FDIC will use its liquidation authority to inject
fundingtokeepaninstitutionafloatwhileitarrangesforabuyerorforawinddownifnobuyer
appears.Losseswouldbebornebyshareholdersfirst(whoshouldexpecttobewipedout),and
then by bondholders. The FDICs new role is meant to eliminate government bailouts while
providing policymakers with better tools to address the failure of a large, complex financial
institutionthantheyhadbeforetheenactmentoftheEESAlegislationandtheTARPprogram.
15
Noteveryone,however,isconvincedthatDoddFrankhassolvedtheproblemoftoobig
tofail.Forinstance,Johnson(2011)assertsseveralpotentialcomplications:31
First,theresolutionauthorityunderDoddFrankispurelydomesticthere
is no crossborder dimension. This presents a major problem if large
financial institutions, which typically have extensive international
operations, need to be shut down in an orderly way. U.S. legislation cant
specify how assets and liabilities in other countries will be treated; this
requires an intergovernmental agreement of some kind. Second, it has
neverbeenclearthatanygovernmentagencywouldbewillingtousesuch
resolution powers preemptivelybefore losses grow so large that they
threatentorockthemacroeconomy.Third,whowouldlosemoneyinany
potentialliquidation?Thefundamentalpremiseoftheresolutionauthority
is that some creditors could face losses, but would they be imposed in an
orderly and predictable manner to avoid undermining confidence and
destabilizing the financial system? Any such thinking today seems far
fetched.
Johnsonarguesthattheproblemlieswiththebiggestbanks,andthatsincetheyposea
realthreat[t]heonlycrediblewaytocounterthisthreatandtheonlyreasonablewayto
protect our democracyis to break them up. Richard W. Fisher (2011), President of the
FederalReserveBankofDallas,apparentlysharesthisview,notingthatthereisonlyonefail
safewaytodealwithtoobigtofail.Ibelievethattoobigtofailbanksaretoodangerousto
permit. ... I favor an international accord that would break up these institutions into more
manageablesize.FormerFDICChairSheilaBair(2012)alsostatesthat[i]twouldsurelybein
thegovernment'sinteresttodownsizemegabanks.
Others disagree with this approach. Krugman (2009), for example, states, One
argumentIdontbuyisthatweshouldtrytoshrinkfinancialinstitutionsdowntothepoint
where nobody is too big to fail. Basically, its just not possible. Federal Reserve Governor
Daniel K. Tarullo (2009) likewise has stated that the conceptual and practical challenges in
breaking up the nations largest financial institutions [make it] more a provocative idea
thanaproposal.Calomiris(2009)agreesthat[l]imitingthesize,complexity,andglobalreach
offinancialinstitutionsisfraughtwithdownsidesfortheinternationaleconomy.Headds,We
cansolvethetoobigtofailproblemwithoutdestroyingglobalfinance.Itcertainlyiswortha
try.Akeyissueinconsideringproposalstobreakuporshrinklargefinancialinstitutionsisto
31.Also,seeBarth,Caprio,andLevine(2012).
16
gauge the costs and benefits of these firms. The Clearing House Association (2011) tallies
benefits,whileSwagel(2011)providesfurtherdiscussion.
III.HowBigAreBigBanksintheUnitedStates?
Over time, the notion of which banks are too big to fail has undergone some
refinement.Theinitialviewconsideredassetsize,butmorerecentdefinitions,whilestillbased
on asset size, take into account additional factors including complexity and systemic
interconnectedness.32
Toanswerthequestionposedinthesectiontitle,wefocusontwomeasures.Thefirstis
asset size. Recall that DoddFrank also focuses on asset size. Moreover, as will be seen,
regardlessofotherfactors,thebanksnowsubjecttothemoststringentU.S.regulatoryscrutiny
all rank among the biggest banks. The second measure we use is bank asset size as a
percentageofU.S.GDP.ThishelpstogaugeabankssizerelativetotheU.S.economy,while
recognizing that it compares the stock of assets against the annual flow of income. Simon
JohnsonandJamesKwak(2010,p.214)arguethatnofinancialinstitution[s]houldbeallowed
tocontrolorhaveanownershipinterestinassetsworthmorethanafixedpercentageofU.S.
GDP.
Figure2showstheshareoftotalbankholdingcompanyassetsaccountedforbythefive
largestU.S.BHCsrangingupthroughthe50largestcompanies.ThetopfiveBHCsaccountfor
slightlyoverhalfofallU.S.BHCassets,whilethe50largestBHCsaccountfor89percentoftotal
assets;thenext966BHCsholdtheremaining11percentofassets.33Informationonthese50
BHCsisreportedinAppendix1.34Ofthesecompanies,eightareincludedamongthe29GSIFIs.
The biggest BHC, JPMorgan Chase, has $2.3 trillion in assets, while the smallest, Hancock
32.The29GSIFIsidentifiedbytheFinancialStabilityBoardandtheBaselCommitteeonBankingSupervisionat
the G20 meeting on November 4, 2011, was based on the following factors, with the individual weights in
parentheses: crossjurisdictional activity (20 percent), size (20 percent), interconnectedness (20 percent),
substitutability(20percent),andcomplexity(20percent)(SeeBCBS,2011).
33.Appendix4showsthatthetotalassetsofallU.S.bankholdingcompaniesequal$16.5trillion,whilethetotal
assetsofallU.S.commercialbanksequal$12.6trillionasoffourthquarter2011.
34. Appendix 1 also shows that these bank holding companies differ substantially with respect to funding their
assetswithdeposits,ratiosofequitytoassets,andratiosofmarketcapitalizationtoequity.
17
HoldingCompany,has$20billioninassets.Bycomparison,theworldslargestpubliclytraded
bank is Deutsche Bank, with $3 trillion of assets; JPMorgan Chase is the ninth largest in the
worldbyassets(seeAppendix5).
Figure2:BiggestU.S.bankholdingcompaniesshareoftotalassets,Q42011
U.S. total BHC assets: US$16.5 trillion
50 biggest
BHCs
89%
20 biggest
BHCs
79%
10 biggest
BHCs
5 biggest
BHCs
67%
52%
Note:TotalassetsofU.S.bankholdingcompaniesarefromreportingformsFRY9Cs(consolidated
statements).BHCswithtotalconsolidatedassetsof$500millionormorearerequiredtofilethisreport.
These50BHCsincludealleightU.S.banksonthelistof29GSIFIsidentifiedbytheFinancialStability
Board.Thirtyfourofthe50biggestU.S.BHCshavemorethanUS$50billioninconsolidatedassets,which
areconsideredassystemicallyimportantfinancialinstitutions,orSIFIs.
Sources:FederalReserveBankofChicago,MilkenInstitute.
CiticorpwasthelargestU.S.BHCin1983,with$126billioninassets(seetable2).Asof
thefourthquarterof2011,Citigroupassetshadgrownto$1,874billion,anincreaseof1,387
percent in nominal terms (Appendix 1). The same growth story is true of other big banks, as
seeninacomparisonoftheinformationintable2andAppendix1.Thebiggestbanksorbank
holdingcompanieshavegottenmuchbiggerovertime,despitedecadesofconcernovertoobig
tofail.
Figure 3 shows the change in the concentration of the assets of U.S. BHCs among the
top10andtop50companiesfrom1986to2011.Thetop10companiesaccountedforroughly
70percentoftotalassetsin2011,whilethecorrespondingfigurewasonlyabout30percentin
1986.Thisrepresentsmorethana200percentincreaseintheshareofthetop10companies.
18
Thetop50companiesalsoaccountedforalargershareoftotalassetsoverthisperiod.Their
share increased from roughly 60 percent in 1986 to 89 percent in 2011. The big are indeed
gettingbigger.
Figure3:ConcentrationofU.S.bankholdingcompanyassets,1986Q42011
Percent
100
90
Top 50 BHCs
Top 10 BHCs
80
70
60
50
40
30
20
10
0
Sources:FederalReserveBankofChicago,MilkenInstitute.
ItisusefultopointoutthatthebiggestBHCsdifferwithrespecttotheimportanceof
theirbankingsubsidiariesonaconsolidatedbasis.Forexample,inthecaseofthelargestBHC,
JPMorgan Chase & Co., its largest bank subsidiary, JP Morgan Chase Bank, accounts for 80
percentofassetsonaconsolidatedbasis(Appendix4).Thissubsidiarybankisalsothelargest
bankintheUnitedStates.However,notallofthelargestbanksaresubsidiariesofthelargest
BHCs. Appendix 4 provides a list of the top 50 banks and their parent holding companies, as
wellastheshareofthetotalconsolidatedassetsaccountedforbythesubsidiarybanks.Based
upon these data, it could make a big difference whether a bailout occurs with a bank or a
BHCindeed, a primary purpose of the new resolution authority was to allow the FDIC to
interveneattheholdingcompanylevel,ratherthanatthebanksubsidiary,aspreviouslyunder
19
FDICIA.Duringthefinancialcrisisof20072009,alargeportionofTARPcapitalinjectionswent
tolargeBHCs(Appendix2).35
Moreover, the Spearman rank correlation coefficient between asset size and funds
received is 0.92 (Appendix 3). This reflects the fact that the TARP capital injections generally
equaled3percentofbanksriskweightedassets;thus,largerinstitutionsreceivedmoreTARP
funds. However, the correlation coefficients also indicate that the capital injection is
significantlyandnegativelycorrelatedwithbothaninstitutionscommonandtangiblecommon
equitycapitaltoassetratios,whilenotsignificantlyrelatedtoeitheraninstitutionsTier1risk
based or total riskbased capital ratios. This indicates that the injections on average were
smallerforthebettercapitalizedinstitutions,butbettercapitalizedbasedonlythetwonon
riskbasedmeasuresofcapital(Appendix3).
TheothermeasureofbankbignessisassetsizerelativetoGDP.Figure4showsthatas
oneaddstheassetsofmoreBHCs,thecumulativetotalrelativetoGDPreaches98percentfor
the50biggestcompanies.Theassetsofjustthe10biggestcompaniesequal75percentofGDP.
Itcouldonlytaketroubleatafewlargefinancialcompaniestosharplycurtailavailablecredit
anddisruptrealeconomicactivity.Acatastrophicscenariowouldbeoneinwhichdifficultyat
keybanksdisruptsthepaymentssystemthatconstitutesthecentralnervoussystemoftheU.S.
economy.Indeed,fearthatthecrisiswouldaffectthepaymentssystemwasakeymotivating
factorbehindtheproposalofTARP.
Figure4:CumulativeassetsofthebiggestU.S.bankholdingcompanies
(%ofU.S.GDP),Q42011
35.Appendix2showsforthe39companiesreceivingthemostfunds,theamounteachreceived.Italsoshowsthat
thefinancialconditionoftheinstitutionsdifferssubstantially,dependinguponthecapitaltoassetratioused.
20
Percent
100
80
Assets of the 50 biggest U.S. BHCs
are 98% of U.S. GDP
60
40
20
1 2 3 4 5 6 7 8 91011121314151617181920212223242526272829303132333435363738394041424344454647484950
10
20
30
40
50
biggestBHCs
biggestBHCs
biggestBHCs
biggestBHCs biggestBHCs
Note:TotalassetsofU.S.BHCsarefromformsFRY9C(consolidatedstatements).BHCswithtotalconsolidated
assetsof$500millionormorearerequiredtofilethisreport.These50BHCsincludealleightU.S.banksonthelist
of29GSIFIsidentifiedbytheFinancialStabilityBoard.Thirtyfourofthe50biggestU.S.BHCshavemorethan
US$50billioninconsolidatedassetsandareconsideredassystemicallyimportantfinancialinstitutions.
Sources:FederalReserveBankofChicago,U.S.BureauofEconomicAnalysis,MilkenInstitute.
The 50 biggest bank holding companies have got even bigger over time, as shown in
Figure 5. In the fourth quarter of 2011, the combined assets of the five biggest companies
totaledabout60percentofU.S.GDP.Bycontrast,in1970thecorrespondingfigurewasonly10
percent.Forthetop10companies,thefiguresincreasedfrom14percentto75percent.And
theassetsoftop50companiesarenowroughlyequaltoU.S.GDP,whichrepresentsabouta
fourfoldincreaseinfourdecades.
21
Figure5:GrowthofthebiggestU.S.bankholdingcompaniesover40years
Percent
Combined assets of the 50 biggest U.S. bank holding companies (% of U.S. GDP)
100
98%
80
60
49%
40
20
33%
33%
1980
1990
25%
1970
2000
2011
Sources:TheBanker,theFederalReserveBankofChicago,U.S.BureauofEconomicAnalysis,MilkenInstitute.
IV.HowBigAretheBiggestBanksintheWorld?
Basedonassetsize,thefivebiggestbanksintheworldaccountedfor14percentoftotal
bankassetsinthefourthquarterof2011.36The50biggestbanksorBHCsaccountfornearly70
percent of total bank assets (see figure 6). Although still relatively high, the figures for the
concentrationofbankassetsworldwidearelowerthanthecorrespondingfiguresforU.S.bank
assets.Selectedinformationonthe50biggestbanksintheworldisprovidedinAppendix5.37It
isseentherethattheworldsbiggestbankisDeutscheBank,with$3trillioninassetsasofthe
fourth quarter of 2011. The smallest is Sumitomo Mitsui Trust Holdings of Japan, with $435
billioninassets.
36.Thetotalassetsofbanksworldwidearebasedonpubliclytradedbanksin180countriesandobtainedfrom
Bloomberg. The IMF Global Financial Stability Report, September 2011, reports that the consolidated assets of
commercial banks worldwide (latest available data) were $100 trillion in 2010. Based on Bloomberg and
BankScope,thetotalassetsofpubliclytradedcommercialbanksworldwidewere$91.5trillionin2010and,inthe
fourthquarterof2011,$96.5trillion.
37.Appendix5alsoshowsthatthesebanksorbankholdingcompaniesdiffersubstantiallywithrespecttofunding
theirassetswithdeposits,ratiosofequitytoassets,andratiosofmarketcapitalizationtoequity.
22
Figure6:Combinedassetsoftheworldsbiggestbanks(%ofbankassetsworldwide),Q42011
World total bank assets: US$96.5 trillion
50 biggest
banks
68%
20 biggest
banks
44%
10 biggest
banks
5 biggest
banks
26%
14%
Note:Theworldsbiggestbanksrankedbytotalassets.IfbankassetsasofQ42011arenotavailable,then
dataforQ32011areused.Totalbankassetsarebasedonallpubliclytradedbanksworldwide,which
includebothbanksandbankholdingcompanies.
Sources:Bloomberg,MilkenInstitute.
Of these 50 big banking companies worldwide, 27 of the 29 GSIFIs identified by
FinancialStabilityBoardareincluded.38OftheeightU.S.banksidentifiedasGSIFIs,two(Bank
ofNewYorkMellonandStateStreet)arenotamongtheworlds50biggestbanks.Bothbanks,
however, are included in the list of the 50 biggest U.S. banks; they appear to have been
designated as systemic on the basis of the key roles they play in the clearing, and in the
custodianship, of assets. The 27 GSIFIs are shaded in Appendix 5, with 17 of these banks in
Europe,fourinAsia,andsixintheUnitedStates.39
Thegeographicaldistributionoftheassetsoftheworlds50biggestbanksisprovidedin
figure7.Thesebanksareheadquarteredin16countriesthataccountfor71percentofworld
GDP.TheUnitedStatesaccountsforthelargestshareofassetsforthe50biggestbanks,at15
percent,whileDenmarkaccountsforthesmallestshare,at0.9percent.
38. Despite the fact that size only accounts for 20 percentin the determination of which banks are GSIFIs (see
footnote32),allbuttwoofthe29ofthesesoidentifiedinstitutionsareamongthe50biggestbanksintheworld.
Thissuggeststhatsizeishighlyandpositivelycorrelatedwiththeotherfactorsthatgointothedetermination.
39.MetLifeInc.isamongtheworlds50biggestbanksbutisnotconsideredaGSIFI.
23
Figure7:Wheretheworlds50biggestbanksareheadquartered,Q42011
Biggest 50 banks headquartered in 16 countries
total assets = US$65.5 trillion
Belgium, 2%
Brazil
2%
Sweden, 1%
Netherlands, 3%
Denmark, 1%
Italy, 3%
Spain, 4%
U.S., 15%
Canada, 4%
Australia, 4%
U.K., 15%
Switzerland, 4%
Germany, 6%
China, 13%
Japan, 11%
France, 12%
Sources:Bloomberg,BankScope,MilkenInstitute.
Figure 8 shows the distribution of the assets of the 50 biggest banks in the world by
countryoverthepast40years.In1970,theUnitedStatesrankedfirst;itsbigbanksaccounted
for40percentofthetotalassetsofthe50biggestbanksintheworld.Japantookthatposition
in1980,1990,and2000,beforeturningitbackovertotheUnitedStatesinthefourthquarter
of 2011. But the U.S. share of assets was 15 percent most recently, far lower than its earlier
share.ThisisalsothecaseforJapan.Chinasshareatthesametimeincreasedto13percent,
only2percentagepointsbelowthatoftheUnitedStates.
24
Figure8:Distributionofworlds50biggestbanksbycountryover40years
1970
1980
Top 50 banks' assets = US$0.4 trillion
Brazil, 2%
Germany,
7%
France,
5%
Switzerland,
Australia,
1%
1%
Canada,
3%
Italy, 4%
Brazil, 2%
Switzerland,
5%
Netherlands,
5%
Canada,
7%
U.S., 40%
Japan,
23%
U.K., 8%
U.K., 9%
Japan,
18%
Italy, 10%
France,
17%
U.S.,
16%
Germany,
17%
1990
2000
U.S., 3%
China, 3%
Italy, 4%
Belgium,
Spain, 3% 2%
Hong Kong,
1%
Netherlands,
6%
Switzerland,
5%
Netherlands,
5%
Italy, 1%
Sweden,
1%
Japan,
21%
Switzerland,
6%
Japan,
48%
U.K., 7%
China, 7%
Germany,
18%
France,
10%
France,
12%
U.K.,
11%
Germany,
12%
U.S.,
14%
2011
Belgium,
2%
Netherlands,
3%
Italy, 3%
Brazil
2%
Sweden, 1%
Denmark,
1%
Spain, 4%
U.S.,
15%
Canada, 4%
Australia,
4%
Switzerland,
4%
Germany,
6%
U.K.,
15%
China,
13%
Japan,
11%
France,
12%
Sources:TheBanker,Bloomberg,BankScope,MilkenInstitute.
25
It is interesting to compare the assets of the worlds 50 biggest banks to world GDP,
similar to the measure taken for U.S. banks.40 Figure 9 shows that the assets of these 50 big
bankswerenearlyequaltoworldGDPinthefourthquarterof2011.Assetsbelongingtothe
top10bankswereslightlymorethanonethirdofworldGDP,whileaddingthenext10biggest
banksincreasedthefiguretoalmosttwothirds.Andthetop30banksraisethefiguretothree
fourthsofworldGDP.Furthermore,sevenofthesebankshaveassetsthatexceed100percent
oftheGDPoftheirhomecountries.Thesebanksareindeedbigbanks,notonlyintermsoftheir
sheerassetsizebutalsorelativetoworldGDP.
Figure9:Cumulativeassetsoftheworldsbiggestbanks
(%ofworldGDP),Q42011
Percent
100
80
Assets of the world's 50 biggest
banks are 94% of world GDP
60
40
20
1 2 3 4 5 6 7 8 10
91011121314151617181920212223242526272829303132333435363738394041424344454647484950
50
20
30
40
biggestbanks
biggestbanks
biggestbanks
biggestbanks biggestbanks
Note:The50biggestpubliclytradedbanksintheworldrankedbytotalassets.WorldGDPisa2011IMFestimate.
Sources:Bloomberg,InternationalMonetaryFund,MilkenInstitute.
40.SomemightarguethatsincetheEuropeanUnionhasapolicytocreateasinglefinancialmarket,bankassets
shouldbecomparedtotheEUGDPratherthanthenationalGDPofthecountryofheadquarters,inwhichcasethe
EUandU.S.figureswouldbeofacomparableorderofmagnitude.However,suchacomparisonofaggregatesis
lessrelevantfromapolicyperspective:Astherecentcrisisbroughthomeforcefully,defactopublicguaranteesfor
most banks come from the home country and only from there, a reality aptly summarized by the quip often
attributedtoMervynKingthatinternationalbanksareglobalinlife,butnationalindeath.Intruth,theEuropean
realityissomewhatblurredbysomebanksmultiplenationalallegiancesGoldsteinandVeron(2011,p.13).
26
Thesebigbanks,moreover,havegottenbiggerovertime.Figure10showsthatwhilethe
assetsofthe50biggestbanksinthefourthquarterof2011totaled94percentofworldGDP,
the corresponding figure was only 15 percent in 1970. This represents more than a sixfold
increaseinfourdecades.Thefiguresforthetopfive,10,and20banksshowsimilarincreases
overtheperiod.
Figure10:Theworlds50biggestbankshavegottenevenbigger
Combined assets of the world's 50 biggest banks (% of world GDP)
Percent
100
94%
80
66%
60
40
45%
20
24%
15%
1970
1980
1990
2000
Sources:TheBanker,Bloomberg,InternationalMonetaryFund,WorldBank,MilkenInstitute.
2011
Figure 11 shows total injections of public capital by governments during the crisis to
financial institutions in the countries in which the 50 biggest banks worldwide are
headquartered. Information is provided for the 50 biggest banks worldwide that received
support,aswellasforotherfinancialinstitutionsthatreceivedsupport(alsoseeAppendix6).
Of the 50 biggest banks worldwide, those receiving injections of public capital were
headquartered in only seven of the 16 countries. The biggest banks that received bailouts
accountforahighof100percentofthetotalbailoutamount,inthecaseofSwitzerland,anda
lowof39percent,inthecaseofGermany.TheUnitedStatesranksthird,at89percentofthe
sevencountries,intermsofthepercentageofthetotalpublicsupportgoingtobanksincluded
inthetop50biggestbanksintheworld.Intermsoftotalbailoutfunds,however,theUnited
States ranks first, the United Kingdom second, and Switzerland seventh. Overall, in six of the
27
sevencountries,overhalfofthetotalamountoffundsinjectedintofinancialinstitutionswent
tothosebanksincludedamongthe50biggestbanksintheworld.Almostbydefinition,itcan
becostlytosupportbigbanks.
Figure11:Capitalinjectiontofinancialinstitutionsinselectedcountries
Total government capital injections to financial institutions during 2008 2009 (US$ billions)
$6.4
$100
$245
$21.1
$20.4
7%
11%
14%
15%
$15.8
$60.2
45%
61%
100%
93%
89%
86%
85%
55%
39%
Switzerland
United
Kingdom
United
States*
Other banks that

received
bailouts
Netherlands
France
Belgium
World's 50
biggest banks
as of Q4 2011
that received
bailouts
Germany
Note:Sevenofthe16homecountriesofthe50biggestbanksworldwideprovidedgovernmentcapitalinjections
tofinancialinstitutionsduringthefinancialcrisis.SeeAppendix2forselectedinformationofU.S.financial
institutionsthatreceivedgovernmentcapitalinjectionsandAppendix6fornonU.S.financialinstitutions.Datafor
theUnitedStatesinthisfigureexcludegovernmentfinancialassistancetoAIG,FreddieMacandFannieMae.
V.PolicyApproachestoLargeBanksandtheTooBigtoFailDilemma
In the aftermath of the financial crisis, policymakers have again sought to reduce the
likelihoodofarecurrence,andtobetterdealwiththenext,perhapsinevitable,crisis.Broadly
speaking,themeasurestakensince2008fitintothreecategories,whichhavedistinctpurposes
butalsocomplementoneanother,totheextentthattheyaresuccessful:
1. requiringincreasedcapitalandliquidity,withthegoalofmakingfirmsmoreresilient
tofinancialmarketdisruptions,andmakingcriseslesslikely.
28
2. restrictingfinancialinstitutionsactivitiesandsize,withthehopethatthiswill
reducetheriskstheytakeandposetothefinancialsystem.
3. devisingaframeworkinwhichtodealwithfailures,includingthroughcorporate
livingwills,expandedresolutionauthority,andperhapseventuallyinternational
coordinationofbankruptciesformultinationalfinancialfirms.
The first, requiring additional capital and more secure access to liquidity, is meant to
ensure that firms have an increased buffer against losses and a greater ability to survive the
strains of a crisis. They also would provide increased protection for taxpayers before the
financial institutions failure prompts consideration of a policy intervention. While most
financialinstitutionsarelikelytofaceincreasedrequirementsforcapitalunderBaselIII,firms
seenassystemicallyimportantgloballyhaveadditionalrequirements.Theserequirementscan
comeaboutthroughbothmultinationalefforts,suchasthedesignationofglobalsystemically
important banks; and through domestic regulation, such as DoddFrank, which subjects the
largest firms, with assets of $50 billion or more, to an enhanced supervisory regime that
includesbothadditionalcapitalchargesandotheraspectsofincreasedregulatoryscrutiny.
Regulators in continental Europe have generally been comfortable with lower capital
requirementsthanhavetheircounterpartsintheU.S.,theU.K,andCanada;thisisoftenseen
asareflectionofthebeliefthatadditionalpubliccapitalwouldbeavailabletostabilizebanksas
needed.ContinuingdifficultieswithfiscalpositionsinGreece,Italy,Spain,andelsewherecould
put this belief to the test.41 The European approach contrasts with that of U.S., where it is
unlikely that another TARPlike authority to inject taxpayer capital into banks will be enacted
for a considerable time because of public anger. As we discuss later, the orderly liquidation
authorityofDoddFrankallowsthedeploymentoftaxpayerresources,thoughnotforindefinite
periods.Sincethisnewauthorityisuntested,itisunclearwhethertheactinrealityfacilitates
theuseofpublicresourcesorinsteadpreventssuchsteps.
Additional capital requirements for large or systemically important firms provide an
incentive against size (and perhaps complexity or interconnectedness). These might also be
seen as an incentive that offsets the possible funding advantages of large firmsa
41.Forashortdescriptionofthisproblem,seeBarth,Li,andPrabha(2011),amongmanyothers.
29
disincentiveforsize,butnotabluntrestrictionalongthelinesofthesecondcategoryofpolicy
measures. Alternately, if a large institutional failure imposes costs on society, the additional
capitalchargescouldbeusedtocorrectforthelatentnegativeexternalityalongthelinesofa
Pigoviantax,thoughinthiscasetheimplicitrevenuefromthetaxaccruestoprivatesuppliers
ofcapitalratherthantothegovernment.
It should be kept in mind that there are benefits to society from large financial
institutions, as well as costs, a point discussed by the Clearing House Association (2011) and
Swagel(2011).42Moreover,thecapitalcharge,asusualwithatax,resultsinadeadweightloss
in the form of reduced lending and economic activity. The quantitative importance of this
impactremainsasubjectofconsiderabledebate.Admatietal.(2010)seelittlenegativeimpact
ofhighercapitalrequirements,butKashyap,Stein,andHanson(2010)seeameaningfulimpact
on bank funding costs during the transition, while banks are raising additional equity capital,
andthenamodestongoingimpact.Researchfromregulatorspointstomodestimpacts,while
banksandtheirassociationspointtogreaterones.Inthewakeoftherecentcrisis,itiscertain
thatlargefinancialinstitutionswillholdmorecapital,bothattheinsistenceofregulatorsandof
theirownvolition.Giventheconsiderablechangesinthefinancialindustryanditsregulation,
theongoingimpactsofhighercapitalstandardswillbeunderstoodonlyovertime.
Thesecondcategoryofpolicychangeinvolveslimitsonfirmsactivitiesandscale.Dodd
Frank imposes some limits on bankingsector concentration, including caps of 10 percent on
anyoneinstitutionsshareoftotalfinancialsectorliabilitiesoranyinstitutionsshareofinsured
deposits.Theselimitscouldaffectfuturemergeractivity.OtherprovisionssuchastheVolcker
Rule,whichseekstolimitproprietarytradingatbanks,andthesocalledLincolnAmendment,
which requires certain derivative trading activities to be pushed out of banks into separately
capitalizedentitieswouldlimitafirmsactivities.Thepresumptionbehindthesepolicyactions
isthatsimplerinstitutionsposelessrisktothefinancialsystemandbroadereconomybecause
42.Itshouldbenotedthatonly7ofthe50biggestbanksintheworldareU.S.banks(Appendix5).Totheextent
thatU.S.banksarelimitedinsizetheymaybeputatacompetitivedisadvantageascomparedtothebiggestbanks
in other countries that are not so limited. After all, as banks expand their geographical reach to tap into new
markets,theymaynaturallybecomebiggerinsize.
30
some activities are inherently more risky and because simpler organizations are more easily
regulated.
An important concern with such provisions is that it is difficult to evaluate the cost
benefitratio,largelybecausethereislittleevidenceoneitherside.Itisnotclear,forexample,
thatameaningfulrelationshipexistsbetweenproprietarytradingandtherecentfinancialcrisis.
ThelossesthatledtoproblemsatLehman,BearStearns,WaMu,andotherfailedinstitutions
wereconnectedtolongterminvestments,suchasmortgagebackedsecuritiesandcommercial
realestate,ratherthantolossesfromthesortofshorttermtradingactivitiestargetedbythe
VolckerRule.Inasense,itisnoteveneasytopinpointtheproblemtowhichtheVolckerRuleis
the solution. This is not to say that there will be no benefits from it. For example, simpler
institutions may very well be less prone to problems and thus less apt to contribute to the
makings of a future crisis. But this is essentially conjecture, and an uneasy basis on which to
reorganizethefinancialsystem.
AsnotedinSwagel(2011),therearelikelytobecostsintermsofreducedliquidityand
increased transactions costs, which in turn translate into less investment, economic growth,
and job creation. Indeed, this concern is implicit in the exemption to the Volcker Rule with
respect to trading in Treasury securities. It is also implicit in the entreaties of domestic state
andlocalborrowers,andofforeigngovernments,forsimilartreatment.Similarly,whilethere
maybebenefitsfromseparatingcertainderivativesactivitiesfrombankholdingcompaniesthat
encompass insured depository institutions, in terms of a simpler and more readily regulated
financial system, there is no evidence either way. Indeed, so far regulators have found it
difficult to implement these provisions of DoddFrank, raising further concerns about the
balancebetweenbenefitsandcosts.
The postcrisis regulatory regime embodied in DoddFrank does not seek to break up
largefinancialinstitutionsortoreinstitutebroaderbarrierstotheiractivities,asdidtheGlass
Steagall Act separating commercial and investment banking. This perhaps reflects the
observation that the failures of firms in the crisis are notwell correlated with the end of the
GlassSteagall restrictions. Bear Stearns and Lehman Brothers both failed, for example, but
they were investment banks, while JPMorgan Chase combined investment banking and
commercial banking but weathered the crisis relatively well. An alternative to GlassSteagall
31
likerestrictionswouldbeforregulatorstofocusmoreintentlyonactivitiesthatappeartopose
particularrisks,andtoactmorepreemptivelytoheadoffsystemicproblems.Thisapproachis
embodiedinthecreationoftheFinancialStabilityOversightCouncil(FSOC)asabodymeantto
lookacrossthefinancialsystem.
While DoddFrank does not actively seek to break up large banks, and while there
appears to be no such movement in other important global financial centers, the recent
regulatoryprocessinsomewaysappearscognizantofthepotentialdangersthatlargefinancial
institutionspose.TheFederalReserveslengthyexaminationoftheacquisitionofINGDirectby
Capital One, for example, has been interpreted as an implicit cautionary warning about the
willingnessofregulatorstopermitacquisitionsthatgiverisetoadditionallargescalefinancial
institutions.
The third category of policies involves changes to the framework for dealing with the
collapseoflargeorsystemicallyimportantfinancialinstitutions.Therearetwomotivationsfor
such policies: the first, making it easier to ensure the stability of the system, and a second,
alertingmarketparticipantstothefactthatinstitutionsaremorelikelytobeallowedtofailand
thus creditors will be forced to take losses. Such recognition in turn may help remove
advantagesthatlargefirmspreviouslyenjoyedfromaperceptionthattheyweretoobigtofail
andthattheircreditorswouldbesupportedintheeventofacrisis.
The requirement for institutions to devise their own living wills might be a partly
symbolicstepinthesensethateventhemostthoughtfulplancouldwellbediscardedinthe
eventofanactualcrisis,especiallyifthegenesisofthecrisiswasnotwellanticipated.Evenso,
thepreparationofalivingwillmayprovideasignalthatregulatorscontemplatefailuresrather
thanbailouts.
The new orderly liquidation authority in Title II of DoddFrank could fundamentally
changethewayinwhichproblemsatlargefinancialinstitutionsareresolved.Asnotedearlier,
this should have profound impacts on the cost of funding for large, complex financial
institutions.Bondholdersandothercreditorsarenowmorelikelytoincurlossesifafirmfails,
even though the Title II authority allows for the deployment of government resources to
support a firm and slow its demise. Absent additional Congressional action (which is now
hardertoimagine,giventheunpopularityoftheTARP),inthecaseofafuturefailureofalarge
32
financialinstitutionthatinvolvesresolutionoftheholdingcompanybeyondsimplytheinsured
depositoryinstitution,bondholderswillincurlosses.
Whileitisdifficulttopredicthowtheresolutionauthoritywillbeused,itseemslikely
thattheproblemsfollowingLehmansdemisewillleadtheFDICtoinitiallydeploygovernment
funds to keep a firm in operation during resolution. The FDIC might then use its new Title II
authoritiestoarrangeadebtforequityswapthatrecapitalizesthefailingfirm,withtheformer
bondholdersasthenewowners.Suchadebtforequityrecapitalizationwouldbesimilartoa
prepackaged Chapter 11 reorganization under the bankruptcy code, although the Title II
authorities would allow this to be done faster and with the government providing the
equivalent of debtorinpossession financing. Losses to the government from such financing
ultimately would be borne by bondholders. The resolution authority provides government
officialswithanopencheckbooktoactthroughthetroubledfirm,withbondholderspickingup
thetab.ItseekstonarrowtheFDICsscopeofactioninresolutionbyguaranteeingbondholders
thattheywillreceiveasmuchinresolutionaswouldhavebeenthecaseunderbankruptcy,but
thisstillgivesscopeforactionstokeepthefirmoperatingunderresolution.
Thepossibilityofhavingsuchaswapimposedonthemshouldaffectthetermsunder
which potential creditors, such as bond buyers, are willing to provide funding to financial
institutionsthatmightbetakenintoresolution.Apotentiallyworrisomeimplicationofthenew
resolution authority is that it could give providers of funding to banks an incentive to flee at
earlysignsoftrouble.Sucharunfromfailinginstitutionsisanimportantdiscipliningdevice,but
the regime change could mean a more hairtrigger response and inadvertently prove
destabilizing.
Theresolutionauthoritywillbeincompleteandperhapsunworkableuntilthereismore
progress on the international coordination of bankruptcy regimes. In the case of Lehmans
failure,forexample,theU.K.bankruptcyregimedisruptedtheoperationsofmanyU.S.based
firmswhenitfrozetheiroverseasassets.Appendix7illustratesthedegreetowhichmanylarge
financialinstitutionsworkbroadlyacrosstheglobalfinancialsystem.While85percentormore
of some large institutions assets are domesticthose of Bank of America, Mitsubishi UFJ, or
especiallythelargeChinesebanksothers,suchasBarclays,havemorethanhalfoftheirassets
outside their home countries. International coordination of both regulatory regimes for both
33
normaltimesandduringresolutionorbankruptcyprocedureswillbecrucialforthecontinued
evolution of the global financial system.43 As Brummer (2012) points out, In the absence of
detailed, prescriptive global standards, national regulators enjoy considerable discretion with
regardtotheirlocalapproaches.Inpractice,suchflexibilitymeansanyonecountryseffortsto
dealwiththeproblemcanpotentiallybeundercutbyanothercountrysinaction(p.250).
Otherpolicyapproachescombinethethreecategorieslistedinthissection.Theuseof
regular stress tests, for example, that provides better information for regulators and market
participants,willinturnhaveanimpactonbankbehavior;transparencycanprovideamarket
based incentive for prudence. While this will not directly address the potential for financial
institutionstobecometoobigtofail,suchinformationandtheresultingincentivescouldhelp
affectbehaviorinawaythatmakesitlesslikelythatfuturefailureswilltranspire.
VI.Conclusion
The idea that some financial institutions are too big to fail is not new. Neither is the
challenge that such firms pose for policymakers. The regulatory regime for large, complex
financialinstitutionsisundergoingavastchangefromthatwhichprevailedbeforethefinancial
crisis. Firms will now be required to hold more capital, have more robust access to liquidity,
undergoincreasedregulatoryscrutiny,andfacelimitationsoncertainactivities.IntheUnited
States and in other countries, many of these changes are evolving as the rulemaking process
movesforwardandasnewregulationsareimplemented.
These changes will bring both costs and benefits. Higher capital and liquidity
requirements, for example, will affect lending activity and thus the overall economy, but the
quantitativeimpactremainstobeseen.Thenewresolutionauthorityislikelytohaveanimpact
oncreditorbehaviorandthusonfundingcosts,butitremainsunclearhowgreatthiseffectwill
be.Itwillbenecessaryforpolicymakerstomonitorsuchimpactsovertimeandtoadjustthe
43.See,forexample,PrabhaandWihlborg(2012)foradiscussionofthisissueasitrelatestoglobalbank
organizationalstructure.
34
regimeasneededtoensurethatthebenefitsofimprovedstabilityarecommensuratewiththe
costsinvolved.44
44.Foraskepticalassessmentofrecentfinancialreformeffortsandanewapproachtoimprovingregulatory
performance,seeBarth,Caprio,andLevine(2012).
35
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38
Appendix1:U.S.50biggestbankholdingcompanies,Q42011
(8of29GSIFIsidentifiedbytheFinancialStabilityBoardarehighlighted)
Bank holding company

JPMorgan Chase & Co.
Bank of America Corporation
Citigroup Inc.
Wells Fargo & Company
Goldman Sachs Group Inc.
Metlife, Inc.
Morgan Stanley
Taunus Corporation
U.S. Bancorp
HSBC North America Holdings Inc.
Bank of New York Mellon Corporation
PNC Financial Services Group Inc.
State Street Corporation
Capital One Financial Corporation
TD Bank US Holding Company
Ally Financial Inc.
SunTrust Banks Inc.
BB&T Corporation
American Express Company
Citizens Financial Group Inc.
Regions Financial Corporation
BMO Financial Corp
Fifth Third Bancorp
Northern Trust Corporation
UnionBanCal Corporation
KeyCorp
RBC USA Holdco Corporation
BancWest Corporation
M&T Bank Corporation
Discover Financial Services
BBVA USA Bancshares Inc.
Comerica Incorporated
Huntington Bancshares Incorporated
Zions Bancorporation
Utrecht-America Holdings Inc.
CIT Group Inc.
New York Community Bancorp Inc.
Popular, Inc.
First Niagara Financial Group Inc.
Synovus Financial Corp.
BOK Financial Corporation
First Horizon National Corporation
City National Corporation
East West Bancorp Inc.
Associated Banc-Corp
First Citizens Bancshares Inc.
Commerce Bancshares Inc.
Cullen/Frost Bankers Inc.
SVB Financial Group
Hancock Holding Company
TOTAL ASSETS
Total assets
($ billions)
Total assets
(% of U.S.
GDP)
2,266
2,137
1,874
1,314
924
800
750
355
340
331
326
271
216
206
201
184
177
175
152
130
127
117
117
100
90
89
83
78
78
69
63
61
54
53
47
45
42
37
33
27
25
25
24
22
22
21
21
20
20
20
14,759
14.8
13.9
12.2
8.6
6.0
5.2
4.9
2.3
2.2
2.2
2.1
1.8
1.4
1.3
1.3
1.2
1.2
1.1
1.0
0.8
0.8
0.8
0.8
0.7
0.6
0.6
0.5
0.5
0.5
0.5
0.4
0.4
0.4
0.3
0.3
0.3
0.3
0.2
0.2
0.2
0.2
0.2
0.2
0.1
0.1
0.1
0.1
0.1
0.1
0.1
Deposits to
Total assets
(%)
49.8
48.4
46.4
70.1
5.0
1.3
8.8
7.8
67.9
41.5
67.4
69.3
72.7
62.3
81.5
23.3
72.3
71.6
28.3
71.6
75.3
64.1
73.5
82.5
71.8
69.8
25.5
70.4
76.2
57.0
73.0
78.2
79.6
80.7
18.0
13.7
53.1
74.8
59.6
82.5
73.6
65.4
86.1
79.6
68.8
84.2
81.3
82.6
83.7
79.4
Common equity
to total assets
(%)
Market cap to
common equity
(%)
7.8
9.9
9.6
9.9
7.4
7.3
9.1
1.5
9.5
9.5
10.5
13.1
8.7
14.4
10.6
6.8
11.2
10.0
12.3
18.0
10.5
11.2
11.0
7.1
13.2
10.9
10.9
10.9
10.8
12.0
16.7
17.2
12.6
9.6
9.9
4.0
21.2
14.9
11.8
16.4
7.4
11.2
11.3
9.8
10.2
13.4
9.0
10.6
11.4
11.4
71.1
27.6
42.9
111.4
67.9
56.7
42.5
Private
159.6
Private
70.4
85.3
103.8
65.6
n.a
n.a.
47.8
100.4
292.1
n.a
40.6
Private
91.0
134.3
n.a
76.1
Private
n.a
114.2
156.7
Private
48.6
69.1
59.0
Private
386.8
60.8
25.6
78.0
24.8
208.9
73.9
86.4
137.5
87.5
64.2
182.9
149.4
90.9
120.3
n.a.=Notavailable(thecompanyisasubsidiaryorhasapendinglisting).
Sources:FederalReserveBankofChicago,NationalInformationCenter,FederalReserve,Bloomberg,U.S.BureauofEconomic
Analysis.
39
Appendix2:FinancialinstitutionsthatreceivedU.S.governmentcapitalinjections
Government financial
assistance
Bank
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
AIG
Fannie Mae
Freddie Mac
Citigroup Inc.
Morgan Stanley
U.S. Bancorp
SunTrust Banks Inc.
Capital One Financial
Regions Financial Corp
Fifth Third Bancorp
Hartford Financial SVCS
American Express Company
BB&T Corporation
Bank of New York Mellon Corp.
KeyCorp
CIT Group Inc.
Comerica Incorporated
Zions Bancorporation
Synovus Financial Corp.
Lincoln National Corp.
Popular Inc.
First Horizon National Corporation
First
received
Funds
received
($ billions)
11/25/2008
2/25/2009
11/24/2008
10/28/2008
10/26/2008
10/29/2008
10/28/2008
10/26/2008
10/28/2008
12/31/2008
11/14/2008
11/14/2008
11/14/2008
11/14/2008
12/31/2008
6/26/2009
1/9/2009
11/14/2008
10/26/2008
11/14/2008
12/31/2008
11/14/2008
10/26/2008
11/14/2008
11/14/2008
11/14/2008
3/13/2009
12/19/2008
7/10/2009
12/5/2008
11/14/2008
11/14/2008
69.8
59.9
50.7
45.0
45.0
25.0
25.0
10.0
10.0
7.6
6.6
4.9
3.6
3.5
3.4
3.4
3.4
3.1
3.0
2.5
2.3
2.3
2.0
1.6
1.4
1.4
1.2
1.0
1.0
0.9
0.6
0.9
Current Status
50 biggest
BHCs as
of Q4
2011
Total
assets
(US$bn)
(Q4, 2011)
N/A
N/A
N/A
556
3,211
(2)
2,172
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
Yes
Yes
Yes
1874
2137
1314
2266
750
924
271
340
177
206
127
117
304
152
175
326
89
45
61
216
100
53
54
69
27
203
37
78
25
40
Selected information prior to first receiving funds

Total
assets
($ billions)
Riskweighted
assets
($ billions)
Common
equity to
assets
(%)
1,022
912
804
2,050
1,831
1,310
2,251
987
1,082
146
247
175
155
146
116
276
126
137
268
101
n.a.
65
286
82
55
55
40
34
167
40
66
33
n.a.
n.a.
n.a.
1,176
1,329
1,101
1,261
297
379
120
223
162
n.a.
116
114
n.a.
n.a.
212
125
109
n.a.
n.a.
75
51
52
47
n.a.
32
n.a.
31
37
26
7.0
-4.1
-3.6
4.8
7.5
5.2
6.1
3.5
3.9
9.8
8.2
10.0
16.5
9.2
8.3
2.8
9.4
9.4
10.3
7.9
n.a.
7.4
4.6
6.0
8.9
10.6
14.8
9.8
5.4
6.0
9.4
7.9
Tangible
common
equity to
assets ratio
(%)
3.6
-4.1
n.a.
2.1
2.5
2.3
3.8
3.1
3.4
3.4
3.7
5.8
8.3
5.0
5.0
2.5
7.0
5.2
2.0
6.2
n.a.
7.2
2.3
5.4
5.7
4.3
13.7
8.4
3.4
4.4
4.3
7.1
(1)
Tier1 riskbased
capital
ratio
n.a.
n.a.
n.a.
8.2
7.6
7.84
8.9
12.7
11.6
8.2
8.5
8.2
12.0
10.4
8.6
n.a.
9.7
9.4
9.3
8.6
n.a.
10.7
16.0
13.1
10.2
8.8
n.a.
8.8
n.a.
9.1
8.8
11.1
Total
riskbased
capital
ratio
n.a.
n.a.
n.a.
11.7
11.5
11.83
12.6
19.0
15.2
11.9
12.3
11.2
14.9
14.6
12.3
n.a.
11.1
14.4
12.8
12.4
n.a.
14.7
17.2
15.4
14.3
12.0
n.a.
12.2
n.a.
10.4
12.8
16.1
assistance
Bank
33
34
35
36
37
38
39
Webster Financial Corp.
First BanCorp
East West Bancorp, Inc.
SVB Financial Group
Other 668 financial institutions
First
received
11/21/2008
11/21/2008
11/21/2008
1/16/2009
12/5/2008
12/12/2008
11/21/2008
Total BHCs that received bailouts and are current among

50 biggest BHCs
Average for 32 BHCs which are currently among 50
biggest BHCs
Average for all publicly traded U.S. banks (prior to the
(2)
bailout period)
Current Status
Funds
received
($ billions)
50 biggest
BHCs as
of Q4
2011
Total
assets
(US$bn)
(Q4, 2011)
Total
assets
($ billions)
Riskweighted
assets
($ billions)
Common
equity to
assets
(%)
0.5
0.4
0.4
0.4
0.3
0.2
0.2
20.1
Yes
No
Yes
No
Yes
Yes
Yes
No
22
19
24
(2)
14
22
20
33
22
18
16
19
12
8
9
18
14
27
14
n.a.
n.a.
6
10.5
9.1
10.2
5.1
9.4
9.1
16.0
Tangible
common
equity to
assets ratio
(%)
6.2
4.8
7.1
4.9
6.5
9.0
7.1
Total =
$218
32
BHCs
Total =
12,131
Total =
11,954
Total =
7,198
8.7
8.7
(1)
9.2
10.8
9.1
11.6
8.8
9.9
7.6
Total
riskbased
capital
ratio
11.1
13.2
11.0
12.8
10.6
14.3
11.3
5.4
9.7
13.1
8.1
14.6
13.8
Tier1 riskbased
capital
ratio
Note:FirstNiagaraFinancialGroupisincludedasthelastbankonthelistofCapitalPurchaseProgrambecauseitisincludedinourlistofthe50U.S.biggestbanks.
N/A=NotApplicable
n.a.=NotAvailable
(1) Thesubsequentquarterisusedifthedatainthequarterpriortobailoutisnotavailable.
(2)AsofQ32011.
41
Appendix3:Spearmanrankcorrelations(basedoninformationfromAppendix2)
Funds
received
Total assets
(Q4, 2011)
Pre-bailout total
assets
Pre-bailout riskweighted assets
Pre-bailout
equity to total
assets
Pre-bailout
tangible
common equity
to total assets
Pre-bailout
Tier1 risk-based
capital
0.6063**
(0.0001)
37
-0.2851
(0.1137)
32
-0.3697**
(0.0373)
32
0.1471
(0.4216)
32
-0.0626
(0.7337)
32
0.7432**
(0.0000)
32
Total assets (Q4, 2011)
0.9197**
(0.0000)
39
Pre-bailout total assets
0.9162**
0.9677**
(0.0000)
(0.0000)
38
38
Pre-bailout risk-weighted
0.9711**
0.9571**
0.9543**
assets
(0.0000)
(0.0000)
(0.0000)
27
27
27
Pre-bailout equity to total
-0.4390**
-0.4869**
-0.5439**
-0.4015**
assets
(0.0058)
(0.0019)
(0.0004)
(0.0379)
38
38
38
27
Pre-bailout tangible common
-0.5865**
-0.7189**
-0.7508**
-0.6536**
equity to total assets
(0.0001)
(0.0000)
(0.0000)
(0.0002)
37
37
37
27
Pre-bailout Tier1 risk-based
-0.1977
-0.1986
-0.1221
-0.2566
capital
(0.2782)
(0.2759)
(0.5055)
(0.1964)
32
32
32
27
Pre-bailout total risk-based
0.1186
0.1439
0.1830
0.0979
capital
(0.5178)
(0.4320)
(0.3162)
(0.6271)
32
32
32
27
Note:Thenumbersinparenthesesarepvalues,andthenumbersinthethirdlinearethenumberofobservations.
**indicatesthesignificancelevelof5percent.
42
Appendix4:FiftybiggestU.S.commercialbanksandtheirholdingcompanies(BHCs),Q42011
Bank
Total
assets
($ billions)
JPMorgan Chase Bank, National Association

Bank of America, National Association
Citibank, National Association
Wells Fargo Bank, National Association
U.S. Bank, National Association
PNC Bank, National Association
Bank of New York Mellon
State Street Bank & Trust Company
HSBC Bank USA, National Association
TD Bank, National Association
SunTrust Bank
Branch Banking and Trust Company
FIA Card Services, National Association
Capital One, National Association
Regions Bank
Chase Bank USA, National Association
Fifth Third Bank
RBS Citizens, National Association
Goldman Sachs Bank USA
The Northern Trust Company
BMO Harris Bank, National Association
Union Bank, National Association
KeyBank National Association
Ally Bank
Manufacturers & Traders Trust Company
Capital One Bank USA, National Association
Discover Bank
Morgan Stanley Bank, National Association
Compass Bank
Bank of the West
Comerica Bank
The Huntington National Bank
Deutsche Bank Trust Company Americas
Wells Fargo Bank South Central, National
First Niagara Bank, National Association
First Republic Bank
RBC Bank USA
Synovus Bank
Metlife Bank, National Association
BOKF, National Association
First Tennessee Bank, National Association
City National Bank
East West Bank
Associated Bank, National Association
First-Citizens Bank & Trust Company
Commerce Bank
The Frost National Bank
TCF National Bank
Silicon Valley Bank
Webster Bank, National Association
1,812
1,452
1,289
1,161
330
263
256
212
206
189
171
169
167
133
123
122
115
107
104
100
97
89
86
85
77
71
68
67
63
62
61
54
51
34
33
28
27
27
26
25
25
23
22
22
21
20
20
19
19
19
Total assets of 50 biggest banks: $9.8 trillion

Total assets of all U.S. banks: $12.6 trillion
Top 50 banks account for 77.8% of total bank assets
BHC name
Consolidated
BHC total
assets
($billions)
2,266
2,137
1,874
1,314
340
271
326
216
331
201
177
175
2,137
206
127
2,266
117
130
924
100
117
90
89
184
78
206
69
750
63
78
61
54
355
1,314
33
N/A
83
27
800
25
25
24
22
22
21
21
20
19
20
19
Bank's total
assets/BHC
total assets
(%)
80.0
68.0
68.8
88.4
97.2
97.0
78.6
98.1
62.2
94.0
96.8
96.7
7.8
64.8
97.1
5.4
97.9
82.4
11.2
99.6
82.9
99.2
97.1
46.4
98.7
34.5
97.5
8.9
100.0
79.9
99.7
99.5
14.4
2.6
99.8
N/A
32.7
98.9
3.2
99.5
99.1
98.5
100.0
99.0
98.5
99.2
99.9
100.0
93.9
98.3

Citigroup Inc.
U.S. Bancorp
Bank of New York Mellon Corporation
HSBC North America Holdings Inc.
TD Bank US Holding Company
SunTrust Banks Inc.
BB&T Corporation
Regions Financial Corporation
Fifth Third Bancorp
Citizens Financial Group Inc.
Goldman Sachs & Group Inc.
BMO Financial Corp
UnionBancal Corporation
KeyCorp
Ally Financial Inc.
Morgan Stanley
BBVA USA Bancshares Inc.
BancWest Corporation
Comerica Incorporated.
Taunus Corporation
Independent bank
RBC USA Holdco Corporation
Synovus Financial Corp
Metlife, Inc.
BOK Financial Corporation
First Horizontal National Corporation
East West Bancorp Inc.
First Citizens Bancshares Inc.
Commerce Bancshares Inc.
Cullen/Frost Bankers Inc.
TCF Financial Corporation
SVB Financial Group
Webster Financial Corporation
Number of BHCs = 45
Total assets of 45 BHCs that control top 50 banks: $14.4 trillion
Total assets of all U.S. BHCs: $16.5 trillion
These 45 BCHs account for 87% of total all BHC assets
All but 2 of 45 holding companies (TCF Financial Corporation and Webster Financial Corporation) are on the list of the 50
biggest BHCs in Appendix 1. Total assets of U.S. bank holding companies are from reporting forms FR Y9Cs (consolidated
statements).BHCswithtotalconsolidatedassetsof$500millionormorearerequiredtofilethisreport.
Sources:NationalInformationCenter,FederalReserve,FederalDepositInsuranceCorporation,MilkenInstitute.
43
Appendix5:Worlds50publiclytradedbiggestbanksandbankholdingcompanies,Q42011
(27of29GSIFIsidentifiedbytheFinancialStabilityBoardarehighlighted)
Bank
Home country
Deutsche Bank AG
BNP Paribas
Mitsubishi UFJ Financial Group
HSBC Holdings Plc
Barclays Plc
Industrial & Comm. Bank of China
Crdit Agricole
Royal Bank of Scotland Group Plc
Mizuho Financial Group
Citigroup Inc
China Construction Bank
Agricultural Bank of China
Bank of China Limited
ING Groep NV
Banco Santander SA
Socit Gnrale
Sumitomo Mitsui Financial Group
UBS AG
Lloyds Banking Group Plc
UniCredit SpA
Credit Suisse Group AG
Commerzbank AG
Nordea Bank AB
Intesa Sanpaolo
Banco Bilbao Vizcaya Argentaria SA
Metlife, Inc.
Royal Bank of Canada RBC
Morgan Stanley
Commonwealth Bank of Australia
National Australia Bank
Toronto Dominion Bank
Bank of Communications Co. Ltd
Natixis
Westpac Banking Corporation
Danske Bank
Bank of Nova Scotia
Standard Chartered Plc
Banque Populaire (1)
Dexia
Australia and NZ Banking Group
Resona Holdings Inc
Banco do Brasil S.A.
Bank of Montreal-Banque de Montreal
Fortis Bank -BNP Paribas Fortis
Ita Unibanco Holdings
Sumitomo Mitsui Trust Holdings
TOTAL ASSETS
Germany
France
Japan
United Kingdom
United Kingdom
China
France
United Kingdom
United States
United States
Japan
United States
China
China
China
Netherlands
Spain
France
Japan
Switzerland
United Kingdom
United States
Italy
Switzerland
Germany
United States
Sweden
Italy
Spain
United States
Canada
United States
Australia
Australia
Canada
China
France
Australia
Denmark
Canada
United Kingdom
France
Belgium
Australia
Japan
Brazil
Canada
Belgium
Brazil
Japan
Total
assets ($
billions)
3,082
2,746
2,722
2,716
2,390
2,380
2,349
2,315
2,266
2,137
2,057
1,874
1,852
1,824
1,814
1,731
1,688
1,684
1,673
1,605
1,567
1,314
1,283
1,178
997
924
906
901
789
800
755
750
713
712
689
686
654
643
613
578
568
563
557
555
527
512
479
465
452
435
65,470
Assets
(% of
home
country
GDP)
84.9
97.8
46.5
109.5
96.3
34.1
83.7
93.3
14.8
13.9
35.1
12.2
26.5
26.1
26
201.7
109.9
60
28.6
241
63.2
8.6
57.1
176.8
27.5
6
158.5
40.1
51.4
5.2
42.9
4.9
47.3
47.3
39.2
9.8
23.3
42.6
175.7
32.9
22.9
20.1
105.2
36.8
9
20.4
27.3
87.9
17.9
7.4
Deposits to
assets (%)
Common
equity to
assets (%)
Market cap
to common
equity (%)
25.8
25.8
58.3
46.8
25
80.3
19.8
35.8
49.8
48.4
49.1
46.4
82.7
83.7
68.8
35.8
45.6
26.7
63.2
22.9
40.9
70.1
41.3
29.7
30.7
5
27.6
28.1
44
1.3
56.5
8.8
52.8
42.7
68.4
72.5
14
46.4
26.3
65.2
60.4
31.4
10.7
49.7
81.2
42.7
59.1
45.9
26.1
64.6
2.4
3.2
4.7
5.9
3.4
6.0
2.7
4.6
7.8
9.9
2.9
9.6
6.6
5.4
6.2
3.5
5.6
3.9
3.9
3.9
4.6
9.9
5.8
4.6
3.4
7.4
3.8
9
7.1
7.3
5.1
9.1
5.2
5.3
6.3
6
4
6.5
3.8
5.8
6.7
4.9
0.3
7
1.5
5.8
5.4
5.7
8.2
5.3
46.8
53.7
51.5
85.4
41.3
164.7
22.5
17.4
71.1
27.6
59.7
42.9
181.3
136.7
125.4
46
68.4
26.6
67.5
72.6
38.3
111.4
53.4
52.5
25.8
67.9
91.6
42.5
75.5
56.7
181.5
42.5
235.6
128.1
157.7
124.8
29.8
144.6
51.1
172.4
136.7
N/A
49.3
130
147.1
120.9
147.1
68.2
112
25.5
Note:Q32011dataareusedifQ42011dataarenotavailable.GDPisfrom2011IMFestimates.
(1) Dataasof2009.Inthatyear,theBanquesPopulairesandtheCaissesdEpargnemergedintotheBPCEGroupe.
Sources:FederalReserveBankofChicago,BankScope,Bloomberg.
44
Appendix6:SelectedinformationofnonU.S.financialinstitutionsworldwidethatreceived
governmentcapitalinjectionsandbiggestnonU.S.banksandbankholdingcompanies
assistance
Country
Bank
First
received
Funds
received
($ billions)
Current Status
50 biggest
banks in
the world
as of Q4
2011
Total
assets
($ billions)
(2)
Q4 2011
Selected information prior to first receiving funds(1)

Total
assets
($billions)
Riskweighted
assets
($billions)
Common
equity to
assets
(%)
Tangible
common
equity to
assets
ratio (%)
Tier1
riskbased
capital
ratio
Total
riskbased
capital
ratio
Six home countries of the worlds current 50 banks that provided capital injections to financial institutions (excluding the United States)
Belgium
France
Germany
Netherlands
Switzerland
United
Kingdom
KBC Groep
Fortis
Dexia
BNP Paribas
Socit Gnrale
Crdit Agricole
Crdit Mutuel Group
Groupe Caisse d'Epargne
Dexia
Banque Populaire
Deutsche Bank AG
Commerzbank AG
Bayerische Landesbank
Hypo Real Estate Holding
WestLB
Landesbank BadenWurttemberg
IKB Deutsche Industriebank
ING Groep NV
Fortis
Aegon
UBS AG
HSBC Holdings Plc
Barclays Plc
Royal Bank of Scotland
Group Plc
Northern Rock
HBOS
Bradford & Bingley
10/27/2008
9/29/2008
9/30/2008
10/22/2008
10/21/2008
10/21/2008
10/21/2008
10/21/2008
9/30/2008
10/21/2008
N/A
11/3/2008
12/18/2008
3/28/2009
1/23/2008
7.12
6.08
2.59
6.60
4.40
3.88
No
Yes
Yes
Yes
Yes
Yes
382
465
557
2,746
1,684
2,349
1.55
1.42
1.29
1.23
N/A
23.54
14.44
7.37
6.47
No
No
Yes
Yes
Yes
Yes
No
No
No
790
907
557
n.a.
3,082
997
430
515
300
2/13/2008
10/20/2008
9/29/2008
11/30/2008
N/A
10/16/2008
N/A
N/A
N/A
6.47
1.94
12.94
5.18
3.00
N/A
6.42
N/A
N/A
N/A
No
No
Yes
Yes
No
Yes
Yes
Yes
Yes
Yes
500
45
1,731
465
448
1,178
1,605
2,716
2,390
568
10/13/2008
70.45
10/13/2008
8/5/2008
10/13/2008
9/29/2008
17.48
5.26
4.64
2.24
Yes
Yes
No
(3)
Yes
No
2,315
1,567
103
1,0001
701
12/15/2009
45
540
1,119
981
2,860
1,693
2,305
812
907
981
563
2,899
838
606
586
399
207
394
191
765
536
504
282
31
191
n.a.
449
322
2,395
133
161
787
274
79
1,935
n.a.
418
1,242
1,780
2,547
2,719
397
48
485
n.a.
n.a.
283
296
1,232
702
201
3,745
1,282
732
197
1,357
104
306
53
660
35
3.7
4.4
1.4
2.4
2.9
2.3
2.7
4.2
1.0
1.7
2.3
0.9
8.8
8.6
11.4
7.6
8.2
8.9
12.5
n.a.
12.3
11.0
10.9
9.6
4.2
2.6
1.4
4.9
1.7
2.4
2.6
-0.4
2.3
4.1
2.4
1.0
4.6
1.2
2.1
2.0
-0.4
2.2
9.8
8.1
11.4
n.a.
10.3
7.6
6.4
6.2
6.5
9.5
9.6
12.3
9.4
12.7
11.3
11.5
8.6
9.7
1.7
2.3
1.7
n.a.
3.2
2.8
2.3
5.0
1.6
5.1
1.6
2.3
1.2
n.a.
-0.5
2.0
1.6
3.4
1.0
3.4
n.a.
6.0
n.a.
n.a.
n.a.
10.4
10.8
8.8
7.9
8.5
11.1
9.8
n.a.
n.a.
n.a.
14.6
14.9
11.9
12.6
15.1
3.3
2.9
1.6
3.0
2.2
0.9
2.3
1.6
2.5
2.1
9.1
8.6
5.1
7.3
7.6
13.2
11.3
10.2
10.9
14.0
assistance
Country
Bank
First
received
Funds
received
($ billions)
Current Status
50 biggest
banks in
the world
as of Q4
2011
Total
assets
($ billions)
(2)
Q4 2011
Total
assets
($billions)
Riskweighted
assets
($billions)
Common
equity to
assets
(%)
Tangible
common
equity to
assets
ratio (%)
Tier1
riskbased
capital
ratio
(1)
Total
riskbased
capital
ratio
Other nine home countries of the worlds current 50 banks that did not provide capital injections to financial institutions(4)
Australia
Brazil
Canada
China
Denmark
Italy
Japan
Spain
Sweden
Commonwealth Bank of
Australia
Westpac Banking
Corporation
Australia & New Zealand
Banking Group
Ita Unibanco Holding
Toronto-Dominion Bank
Bank of Nova Scotia
Bank of Montreal-Banque de
Montreal
Industrial & Commercial Bank
of China
Bank of China Ltd.
Bank of Communications Co.
Ltd.
Danske Bank
UniCredit SpA
Intesa Sanpaolo
Mitsubishi UFJ Financial
Group
Sumitomo Mitsui Financial
Resona Holdings Inc.
Sumitomo Mitsui Trust
Holding
Banco Santander SA
Banco Bilbao Vizcaya
Argentaria
Nordea Bank AB
N/A
N/A
Yes
713
467
197
5.3
3.7
8.2
11.6
N/A
N/A
Yes
712
519
271
4.6
3.8
7.4
10.9
N/A
N/A
347
154
4.0
2.8
7.8
10.8
N/A
N/A
372
218
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
239
206
621
496
451
n.a.
n.a.
248
180
220
5.5
6.1
8.0
4.1
5.8
4.1
4.7
6.1
n.a.
2.4
2.4
3.6
7.7
13.0
14.7
9.4
9.5
9.8
11.1
13.6
14.9
11.6
13.4
13.9
N/A
N/A
366
178
4.1
3.6
9.9
12.3
N/A
N/A
1,674
804
N/A
N/A
N/A
N/A
N/A
N/A
1,107
946
n.a.
615
575
n.a.
5.4
6.2
6.7
n.a.
5.3
6.1
6.7
n.a.
10.0
10.2
10.9
n.a.
12.1
12.2
13.8
n.a.
N/A
N/A
355
185
N/A
N/A
N/A
N/A
N/A
N/A
663
1,668
892
175
864
560
5.7
3.0
5.3
8.0
5.7
2.2
2.8
n.a.
10.0
10.1
6.5
6.9
14.1
13.9
10.1
10.0
N/A
N/A
1,827
1,034
N/A
N/A
N/A
N/A
N/A
N/A
1,443
1,046
432
607
597
n.a.
3.6
1.5
2.8
-0.6
3.2
1.4
2.5
-0.7
7.6
7.4
7.1
n.a.
10.6
11.5
10.3
15.1
2.7
5.3
2.3
3.2
n.a.
7.9
n.a.
11.4
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Yes
643
Yes
Yes
Yes
Yes
Yes
Yes
555
512
452
755
689
578
Yes
479
Yes
Yes
Yes
Yes
2,380
1,852
1,814
1,824
Yes
Yes
Yes
Yes
686
613
1,283
901
Yes
Yes
Yes
Yes
2,722
2,057
1,673
527
Yes
Yes
435
1,688
Yes
Yes
789
906
Average for non-U.S. banks that received bailout funds and are currently among 50 biggest banks worldwide
Average for non-U.S. banks that did not receive bailout funds and are currently among 50 biggest banks worldwide
46
161
n.a.
1,436
665
744
393
619
272
5.0
4.0
3.4
3.4
7.8
n.a.
12.3
n.a.
1,607
495
2.7
2.0
9.0
11.6
963
457
4.4
3.3
9.1
12.4
Note:Thislistincludesfinancialinstitutionsthatreceivedfinancialassistancefromgovernmentsfrom15countriesinwhichthe50currentbiggestbanksintheworldare
headquartered.TheinformationforU.S.bankholdingcompaniesisprovidedinAppendix2.Somefinancialinstitutionshaveassetsthatexceedtheassetsofsomeofthe50
biggestbanksintheworld,buttheyarenotlistedinAppendix5becausetheyarenotpubliclytradedorclassifiedasbanksorbankholdingcompanies.
N/A=NotApplicable
n.a.=NotAvailable
(1)Thesubsequentquarterisusedifthedatainthequarterpriortobailoutisnotavailable.
(2)Q32011dataareusedifQ42011dataarenotavailable.
(3)SubsidiaryofLloydsBankingGroupPlc.
(4)Selectedinformationofbanksthatdidnotreceivefundsisasofthethirdquarterof2008.
47
Appendix7:Ratioofdomesticassets(revenue)relativetoforeignassets(revenue),
rankedbybanktotalassetsizeasof2010
Bank
BNP Paribas
Deutsche Bank AG
HSBC Holdings Plc
Royal Bank of Scotland Group Plc
Mitsubishi UFJ Financial Group
Credit Agricole
Industrial & Comm. Bank of China
UBS AG
Barclays Plc
Citigroup Inc.
ING Groep NV
Banco Santander SA
Bank of China Ltd.
Socit Gnrale
Sumitomo Mitsui Financial Group
UniCredit SpA
Commerzbank AG
Intesa Sanpaolo
Morgan Stanley
Nordea Bank AB
Banco Bilbao Vizcaya Argentaria
Metlife Inc.
Danske Bank
Westpac Banking Corporation
Dexia
Natixis
Toronto-Dominion Bank
Bank of Communications Co. Ltd.
Bank of Nova Scotia
Banque Populaire
Resona Holdings Inc.
Australia and NZ Banking Group
Bank of Montreal-Banque de Montreal
Fortis Banque
Ita Unibanco Holding
Commonwealth Bank of Australia
Sumitomo Mitsui Trust Holding
Home country
France
Germany
United Kingdom
United Kingdom
United States
Japan
France
United States
China
Switzerland
United Kingdom
United States
Japan
Netherlands
China
Spain
China
China
United Kingdom
France
Japan
Italy
United States
Switzerland
Germany
United States
Italy
United States
Sweden
Spain
United States
Canada
Australia
Denmark
Australia
Belgium
France
Canada
China
Canada
France
United Kingdom
Japan
Australia
Brazil
Canada
Belgium
Brazil
Australia
Japan
Total assets,
2010
($ billions)
2,671
2,532
2,455
2,266
2,265
2,184
2,130
2,118
2,038
2,003
1,951
1,914
1,672
1,667
1,640
1,627
1,587
1,569
1,546
1,513
1,318
1,242
1,227
1,105
1,008
911
880
808
777
739
731
714
662
655
652
651
612
609
600
578
536
517
516
513
484
480
465
438
425
160
Domestic
assets/total
assets (%)
48.0
(1)
n.a.
50.9
64.2
85.6
(2)
85.2
77.7
(3)
61.0
96.3
9.9
40.8
(3)
55.8
88.6
51.7
97.5
41.0
81.5
73.7
88.1
71.9
87.2
41.7
100.0
17.9
(1)
65.0
(3)
99.9
93.2
72.2
22.9
(4)
66.0
68.0
55.6
73.2
(5)
82.4
42.5
(6)
90.5
76.4
57.3
91.1
n.a.
n.a.
(7)
22.8
100.0
62.2
98.6
(1)
n.a.
78.9
(1)
n.a.
(5)
80.3
100.0
Total net
revenue
($ billions)
58.2
37.9
80.0
49.3
110.2
53.0
26.7
102.7
56.3
30.8
45.6
86.6
31.8
72.8
48.1
n.a.
40.9
43.2
36.2
35.0
45.0
34.0
85.2
30.2
16.8
39.2
22.1
31.6
12.4
n.a.
52.7
27.8
18.1
8.5
21.0
7.4
5.3
21.9
15.5
n.a.
n.a.
16.1
8.7
17.4
38.4
11.8
3.9
n.a.
45.8
3.9
Domestic net
revenue/total net
revenue (%)
34.9
30.8
(8)
34.3
64.3
79.1
(9)
79.0
51.1
78.4
97.1
39.6
(2)
44.1
30.8
(9)
86.1
31.3
97.9
n.a.
80.3
99.4
100.0
49.5
89.3
36.9
100.0
29.3
63.4
55.1
77.1
68.5
34.8
n.a.
(9)
82.6
67.8
64.3
56.0
(9)
80.3
42.7
(2)
60.1
(2)
63.4
96.4
n.a.
n.a.
9.5
100.0
(2)(10)
85.7
100.0
75.1
(9)
66.3
n.a.
(9)
88.1
84.3
Sources:Bloomberg;companiesrepresentatives,FDIC,MilkenInstitute.
(1)Informationobtainedfromcompaniesrepresentatives.
(2)Databasedoneither2009or2011.
(3)DataaretheratioofdomesticassetstototalassetsoftheFDICinsuredsubsidiariesoftheholdingcompany.Theratiofor
theholdingcompanycouldnotbeobtainedfromcompaniesrepresentatives.
(4)DomesticassetsarethosefromSpainandPortugalcombined.
(5)ThedataareasofDecember31,2007.
(6)ThedataareasofDecember31,2008.DomesticassetsarethoseinEuropeanUnioncountries.
(7)Americas,U.K.,andthegroupsheadofficecombined.
(8)DataonforeignrevenuesarebasedonrevenuefromotherEuropeancountries.
(9)Databasedongrossrevenue.
(10)DomesticnetrevenueisfromAustraliaandNewZealandcombined.
48

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JustHowBigIstheTooBigtoFailProblem?

broader activities, such as investment banking, marketmaking, and fullservice asset

Total government capital injection to U.S.

Total government capital injection to U.S.

unfair to smaller companies, damaging to competition, and tends to

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Top 50 banks' assets = US$2.7 trillion

Top 50 banks' assets = US$9.9 trillion

Top 50 banks' assets = US$21.3 trillion

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Bank holding company

Selected information prior to first receiving funds

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Selected information prior to first receiving funds

Pre-bailout riskweighted assets

Total assets (Q4, 2011)

JPMorgan Chase Bank, National Association

Total assets of 50 biggest banks: $9.8 trillion

JPMorgan Chase & Co.

Selected information prior to first receiving funds(1)

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