Too Big To Fail

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A financial firm for which the economic and or social consequences of its disorderly failure and liquidation are considered unacceptable to the society within which it operates.

A consequence of the perceived TBTF status of a firm is that it is likely to be ‘rescued’ by the State if the relevant State has sufficient resources.

The first recognised TBTF bank was the Continental Illinois (CI), the 7th largest US Bank, that was seized by the Federal Deposit Insurance Corporation (FDIC) in 1984 to protect the banking system and allow orderly continuation of the business while substantially wiping out shareholders.

The term "Too Big to Fail" was given currency in congressional testimony following the "rescue" of CI.

In similar vein the IMF uses the phrase "Too important to fail" (TITF).

See also