Financial Benefits Of Banks : Some Chilean Lessons

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WORKING PAPER “Financial Benefits in TBTF Banks: Some Chilean Lessons” Boston University Center for Finance, Law & Policy SUBMITTED BY Mauricio Benitez Research Fellow, BU Center for Finance, Law & Policy FACULTY MENTOR Cornelius Hurley Director, BU Center for Finance, Law & Policy Professor of the Practice of Banking Law September 8th, 2015 ABSTRACT The present working paper is referred to the analysis of some “financial benefits” that banking institutions would be receiving as Too Big to Fail (TBTF) banks. The request is whether those institutions are constantly subsided from governments or it is merely a hypothetical idea. For those purposes, it is analyzed the Chilean banking industry to disclose the implicit…show more content…
As a result, policymakers, congressmen, local and international organizations, and governments would be able to use this work for the financial and banking reform. At the end, the purpose is bringing some balance between TBTF banks and small and medium size banks, in a real free market environment. SECTION ONE CHILEAN BANKING INDUSTRY AND FINANCIAL CRISES a. Introduction One of the most important episodes that Chile has faced in its entire history is the huge banking and financial crisis in 1982-1983. Domestic financial deregulation and economic crisis led to substantial failure of its local economy. Additionally, there took place a considerable bailout of the financial system, and some of the main changes in the banking’s structure that we know nowadays. Globally, after the financial crisis 2008-2009 many consequences the collapse left, as well. In the US particularly we can find numerous M&A operations, market movements and large transactions in the banking industry that we can find in Chile, as well. Economists, bankers, congressmen, and part of the industry have been thinking that it is the time to make some adjustments. Despite that fact, some of those people believe that big banks, without any break up or reform, are more stable and safer than smaller and less complex banks. Moreover, those defenders have stated that the regulatory reforms
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