Module: | Assessment Indicators & Metrics
Q11: Consider the following statements regarding the "Too Big to Fail" (TBTF) tag:
Assertion (A): D-SIBs often enjoy a competitive advantage in funding markets.
Reason (R): Market participants perceive an implicit government guarantee that these banks will be bailed out in the event of distress.
Reason (R): Market participants perceive an implicit government guarantee that these banks will be bailed out in the event of distress.
✅ Correct Answer: A
The systemic importance of D-SIBs leads to a perception of implicit backing, which reduces the risk premium creditors require, allowing these banks to borrow at lower costs.
This is a common economic side-effect of being a Domestic Systemically Important Bank (D-SIB).
This is a common economic side-effect of being a Domestic Systemically Important Bank (D-SIB).