Abstract and Keywords
This chapter explores how the handling of bank failures in the global financial crisis led to dramatic changes in provisions for crisis avoidance and crisis management at the national and international levels. These provisions have led to an increase in the role of the central bank. The intention has been to end the idea of “too big to fail” by giving the largest banks capital and liquidity buffers that make failure unlikely and also to introduce bailing in as a substitute for bailing out. This aggregation of powers in the central bank raises problems of potential conflict of interest and politicizes the role of the central bank in a way that may compromise its independence. Central banks may thus be at the apex of their power and find that functions are taken away from them in the future when the nature of the problems is exposed.
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