The Obama regulatory reform package would empower the Federal Reserve to rescue Too-Big-to-Fail financial institutions. Bank of England governor Mervyn King suggested during a June 17 speech at the Lord Mayor’s banquet for London bankers and merchants that the BofE ought to have similar authority. And the European Council proposed last week the creation of a trans-national European System Risk Board to monitor and supervise Too-Big-to-Fail banks in the EU. But a new study from Celent says that the banks in some countries are so big that the respective governments may not be able to bail them out.
For 20 years deposit concentration has been “increasing dramatically” in the U.S., Celent notes, but “other countries have experienced far more deposit concentration, which means that competition can be reduced and systemic risk can be greater.” The report uses the Herfindahl-Hirschman Index (HHI) to help gauge the threat and the ability of countries to sustain their banking sectors if necessary.