Small Countries, Large Multi-Country Banks

The experience of the Nordic-Baltic region in recent years provides an excellent illustration of the way that the developments of the banking system and financial markets have outgrown the traditional countrybased system of regulation and concern. The size, complexity, inter relational and multinational character of the banking system means that not only is the problem of TBTF writ large but it is not clear whether the authorities are in a position to handle a major failure should it occur. Indeed the problem is in many respects the reverse of what is traditionally understood. Traditional thinking was that society could not afford the costs of failure and hence the authorities would choose to bail out a bank in difficulty. Now the concern is that the banks are so large and complex compared with the individual countries that society could not afford to bail them out. They are thus in a real sense ‘too big to save’ (TBTS).