The £46bn cost of “too-big-to-fail”

Ethical Markets Reforming Global Finance

British banks are getting an effective taxpayer subsidy of £46bn a year because they are extraordinarily large and have a unique status in the economy, according to new research from nef.

The market believes that the government will always step in and rescue banks when they are in crisis. After the crash of 2008, some banks deemed “too-big-to-fail” were bailed out with public money. Because of this government guarantee, banks can borrow at artificially low rates, saving the UK’s top five banks £46bn last year. No other industry benefits from such a subsidy.

nef believes that retail banks need to be treated and regulated like utility companies, rather than as regular industries, so as to ensure they benefit the public and perform socially useful activities.

Read more…