Degree Name
Master of Arts
Graduate Program
Economics
Advisor
Professor AKM Mahbub Morshed
Abstract
The ongoing issue of 'Too Big to Fail' (TBTF) institutions is still a major challenge for modern banking systems. This paper looks at the economic costs of TBTF by using both historical analysis and a comparison of institutions in the United States, Europe, and China. By tracing how banking systems have developed from early financial intermediaries to today’s systemically important institutions, the paper shows that features like high leverage, unstable funding, and government guarantees have often led to systemic risk. The results indicate that although reforms after the financial crisis have lowered the chances of bailouts, TBTF has not disappeared. Implicit guarantees still affect funding costs, encourage risk-taking, and influence how credit is allocated, especially through links between banks and governments in Europe and through state control in China. The paper argues that TBTF remains an ongoing policy challenge, balancing financial stability with economic efficiency.