21-26 The existence of the "too big to fail" doctrine may encourage large banks to take excessive risks in securities underwriting activities.

Question

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The "too big to fail" doctrine suggests that the government or central bank will intervene to save a large bank from failure in order to prevent a wider economic crisis. This sense of security may lead these banks to take greater risks in securities underwriting activities because they believe they will not suffer the consequences of potential failure.

21-26 the Existence of the "Too Big to Fail" Doctrine