By: M. P. Ram Mohan & Sai Muralidhar K
PDF: Too Big to Fail
The concept of Too Big To Fail (TBTF) has, for a long time, been associated with systemically important banks, insurance companies, and other financial institutions. The emergence of Big Tech companies, which permeate global markets, challenges the traditional notions of TBTF. Big Tech companies’ growing size and interconnectedness to the global economy have led to concerns emerging in the domains of antitrust law, data privacy laws, and financial stability. A key facet of financial stability regulation is the development of robust insolvency resolution frameworks to deal with potential failures of TBTF companies. This Article analyses whether Big Tech companies pose systemic risks to the financial system and the broader economy and, consequently, if they are TBTF, should there be special insolvency resolution frameworks akin to other systemically important institutions. The systemic risks Big Techs pose today may be substantially higher than traditional TBTF firms due to their deep interconnectedness with financial institutions. The Article explores the concept of Systemically Important Technological Institutions (SITI) and the challenges in designating them as TBTF.
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