#2222. Resolving “Too Big to Fail”

August 2026publication date
Proposal available till 30-05-2025
4 total number of authors per manuscript5020 $

The title of the journal is available only for the authors who have already paid for
Journal’s subject area:
Accounting;
Economics and Econometrics;
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Abstract:
Using a synthetic control research design, we find that living will regulation increases a bank’s annual cost of capital by 22 bps, or 10% of total funding costs. This effect is stronger in banks measured as systemically important before the regulation’s announcement. We interpret our findings as a reduction in Too-Big-to-Fail subsidies. The effect size is large: multiplying our bank-specific point estimates by funding size implies a subsidy reduction of $42B annually. The impact on equity drives the main effect. The impact on deposits is statistically indistinguishable from zero, passing the placebo test for our empirical strategy.
Keywords:
Cost of capital; Dodd-Frank; Resolution plans; Time consistency; Too big to fail

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