"Too bank to fail" ... Riflessione sulle crisi bancarie

Robert Schiller gathers the most powerful narratives observed empirically in history. He refers to them as "perennial narratives." Among the narratives examined, the one about the bank run is very powerful, among the most powerful observed. A narrative spreads like a virus in a pandemic event. The bank run narrative is clearly based on the fear of an event with such a low probability that it can be overlooked. Liquidity and solvency of banks are intimately connected, and in this narrative context, events are generated where non-transparency becomes a survival element. However, the market needs transparency to create liquidity. For those involved in banking for a long time, both from a legal and technical perspective – certainly including Franco Belli's disciples – the "Bail-in" approach seemed immediately absurd. The "Bail-out" is the biologically coherent approach with the behavioral impact of the narrative on banks. And, when the narrative spreads, it is inevitable. Systemic banks force exceptional interventions. But non-systemic banks, it was narrated, the small ones, can, through internal rescue, transparently face the crisis. This, too, has proven to be a mistake. Banks are "too banks to fail." Therefore, they need strict, suffocating rules that can compromise their long-term profitability. Or a change in the business model that tends to make them less "bank-like." The end of banking alchemy, as Mervin King would say.