G-SIBs (Global-Systemically Important Banks) 'Too Big To Fail'"A too-big-to-fail firm is one whose size, complexity, interconnectedness, and critical functions are such that, should the firm go unexpectedly into liquidation, the rest of the financial system and the economy would face severe adverse consequences...Governments provide support to too-big-to-fail firms in a crisis not out of favoritism or particular concern for the management, owners, or creditors of the firm, but because they recognize that the consequences for the broader economy of allowing a disorderly failure greatly outweigh the costs of avoiding the failure in some way. Common means of avoiding failure include facilitating a merger, providing credit, or injecting government capital..."
-Ben Bernanke (2010)
Basal Committee on Banking Supervision, Bank for International Settlements (2013). Global Systemically Important Banks.
During the financial crisis that started in 2007, the failure or impairment of a number of large, globally active financial institutions sent shocks through the financial system, which, in turn, harmed the real economy. Supervisors and other relevant authorities had limited options to prevent problems affecting individual firms from spreading and thereby undermining financial stability. As a consequence, public sector intervention to restore financial stability during the crisis was conducted on a massive scale. Both the financial and economic costs of these interventions and the associated increase in moral hazard mean that additional measures need to be put in place to reduce the likelihood and severity of problems that emanate from the failure of global systemically important financial institutions (G-SIFIs).
The Committee is of the view that global systemic importance should be measured in terms of the impact that a bank’s failure can have on the global financial system and wider economy, rather than the risk that a failure could occur.
The selected indicators reflect the size of banks, their interconnectedness, the lack of readily available substitutes or financial institution infrastructure for the services they provide, their global (cross-jurisdictional) activity and their complexity.
Bucket 4
HSBC
JP Morgan Chase
Bucket 3
Barclays
BNP Paribas
Citigroup
Deutsche Bank
Bucket 2
Bank of America
Credit Suisse
Goldman Sachs
Mitsubishi UFJ FG
Morgan Stanley
Richard A Werner (2014). Can banks individually create money out of nothing?—The theories and the empirical evidence. International Review of Financial Analysis.
Thus it can now be said with confidence for the first time – possibly in the 5000 years' history of banking - that it has been empirically demonstrated that each individual bank creates credit and money out of nothing, when it extends what is called a ‘bank loan’. The bank does not loan any existing money, but instead creates new money. The money supply is created as ‘fairy dust’ produced by the banks out of thin air. The implications are far-reaching.
HD Macleod (1855). The Theory and Practice of Banking.
These banking Credits are, for all practical purposes, the same as Money. They cannot, of course, be exported like money: but for all internal purposes they produce the same effects as an equal amount of money. They are, in fact, Capital created out of Nothing.
René Guénon (1945). The Reign of Quantity and the Signs of the Times.
The control of money by the spiritual authority, in whatever form it may have been exercised, is by no means exclusively confined to antiquity, for without going outside the Western world, there is much to indicate that it must have been perpetuated until toward the end of the Middle Ages, that is, for as long as the Western world had a traditional civilization. It is impossible to explain in any other way the fact that certain sovereigns were accused at this time of having ‘debased the coinage’; since their contemporaries regarded this as a crime on their part, it must be concluded that the sovereigns had not the free disposal of the standard of the coinage, and that, in changing it on their own initiative, they overstepped the recognized rights of the temporal power.
Since money lost all guarantee of a superior order, it has seen its own actual quantitative value, or what is called in the jargon of the economists its ‘purchasing power’, becoming ceaselessly less and less, so that it can be imagined that, when it arrives at a limit that is getting ever nearer, it will have lost every justification, and that it will disappear of itself, so to speak, from human existence. Since pure quantity is by its nature beneath all existence, when the trend toward it is pressed to its extreme limit, as in the case of money, the end can only be a real dissolution.
Laurie Law, Susan Sabett, Jerry Solinas {NSA} (1996). How to make a mint: the cryptography of anonymous electronic cash.
In particular, the dangers of money laundering and counterfeiting are potentially far more serious than with paper cash. These problems exist in any electronic payment system, but they are made much worse by the presence of anonymity. Indeed, the widespread use of electronic cash would increase the vulnerability of the national financial system to Information Warfare attacks.
Satoshi Nakamoto (2008). Bitcoin: A peer-to-peer electronic cash system.
A purely peer-to-peer version of electronic cash would allow online
payments to be sent directly from one party to another without going through a
financial institution.
