ABSTRACT
This chapter explores Market Failure Analysis (MFA) of the Bank Structural Reform (BSR). The rationale for the structural reform can be explained by the decoupling approach used by engineers referred to as the ‘chained battleship’ metaphor. The price-based approach mainly referred to the capital requirement, the leverage requirement, and additional capital buffer requirement. The structural-based approach is to limit the scope and size of banks so that the hidden risks can be restricted to an appropriate scale. The connotation of the Too big to fail (TBTF) bank structural problem is very broad. The bank structural reform is, among others, a critical part of their agenda, which denotes the separation of retail and commercial banking from investment banking and trading activities. The Liikanen Report was proposed to assess and evaluate the necessity of conducting a structural reform in the banking sector in the EU.
