ABSTRACT
This chapter analyses the manifestations of identified behavioural factors in the Too big to fail (TBTF) bank structural problem. These analyses act as the foundation for further discussion of the regulation revamp on separation and resolution to deal with the TBTF bank structure problem. To analyse the behavioural aspect of the TBTF bank structural problem, it needs to start with behavioural theory and its origin. The chapter also analyses behavioural bias caused by ignorance identified in behavioural economics and how this bias played a significant role in the development of the TBTF structural problem. A fundamental reason is that the principle of a free market based on the economic person hypothesis and the embodiment thereof, the world’s overall capitalism upturn, cannot represent a complete picture of world economic history. In the development of the TBTF bank structural problem, the inclination of market participants to make mistakes also played a considerable role.
