The concept of 'Too Big to Fail' in banking refers to:
A. The legal requirement that all banks must be small
B. Only the size of non-bank firms
C. The expectation that systemically important banks will receive government support in the event of distress
D. The absence of any systemic risk
Answer: Option C
Solution (By JKSSB Mock Tests)
Too-big-to-fail refers to the market perception or policy practice that certain large and interconnected financial institutions will be rescued by the authorities because their failure would impose systemic costs.
Explanation:
New Institutional Economics, associated with Coase, North and Williamson, analyses how institutions, property-rights structures and transaction costs shape economic behaviour and long-run performance.
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