Tag: Ratings

Ratings

Markets, Ratings Agencies Divided Over “Too Big to Fail”

A new blog by economists at the Federal Reserve Bank of New York (NY Fed) shows that ratings agencies and financial markets are divided about whether the Dodd-Frank Act has significantly reduced the “too big to fail” problem.

Noting that one of the goals of Dodd-Frank was to end “too big to fail”, the blog points out that to this end, the Act required systemically important financial institutions to submit detailed plans for an orderly resolution (“living wills”) and authorised the Federal Deposit Insurance Corporation (FDIC) to create an alternative resolution procedure.

The response from the FDIC was to create a “single point of entry” (SPOE) strategy, announced in December 2013, in which healthy parent companies bear the losses of their failing subsidiaries.