The Rise of Global Megabanks

How deregulation and mergers from the 1980s created giant global banks like JPMorgan and HSBC, and how the 2008 crisis exposed the risks of banks that are too big to fail.

From the 1980s, banks grew into global giants.

Drivers

Deregulation: removing limits on branch expansion and activities.
Mergers: banks combined, like JPMorgan Chase and Bank of America.
Globalisation of finance.

Size

The largest banks now have balance sheets of trillions of dollars.

Too big to fail

Banks so large and connected that their failure would harm the whole economy.
Governments feel forced to rescue them, creating moral hazard.

2008

Lehman Brothers failed in September 2008, triggering a global crisis.
Governments bailed out many big banks.

After 2008

Basel III raised capital requirements.
Big banks were designated systemically important with extra rules.
Stress tests.

India

The RBI designates SBI, HDFC Bank and ICICI Bank as domestic systemically important banks.

The bailout

In 2008, governments injected capital into major banks to prevent their collapse from dragging down the economy.

Thinking bigger banks are always safer

Size can create systemic risk and moral hazard.

Key takeaways

Deregulation and mergers created global megabanks.
Too-big-to-fail banks create moral hazard.
Lehman's 2008 failure triggered a global crisis.
Post-2008 rules raised capital and oversight.