brit banks too crucial to let fail..... spontaneously ?

1) "The experience of the crisis has revealed that a credible threat of failure does not always exist for banks. While equity holdings were severely diluted through state intervention, debt holders of some failed banks did not incur losses and were guaranteed by governments."


" To the extent that neither banks nor their creditors paid for this guarantee,
 it can be considered an implicit subsidy."


2)"The implicit subsidy of banks represents a transfer of resources from one set of agents — the government (and ultimately taxpayers) — to the financial sector."

nonsense
what if  the subsidy is borrowed funds that are  simply monetized as part of a recovery program


3)" The distribution of the benefits depends on the underlying competitive structure of the banking industry, scarcity of its resources and the precise nature of the change in incentives that the subsidy induces."

ya ya ya ...

the distribution of  an artificial  institutionally produced "scarcity"
ie credit  in finite amounts
 is a key part of the incentive reward punishment device

alas that must be contravertable
for macro stability over the long haul of n reproduction cycles

4) ".. it seems likely that bank creditors, customers, staff and shareholders all benefit to some degree, at the expense of taxpayers."

see above not to  ( 2)


.

-------------------------------------------

• "Funding advantage’ models:
•  value the subsidy as the aggregate reduction in the cost of bank funding
•  due to an implicit government guarantee"

• ‘Contingent claims’ models
•  value the subsidy as the expected payment from the government
•  to the banking system necessary to prevent default."

---------------------------------------------------------------------------------------

"Funding-advantage models compare the cost a bank faces in issuing its debt with a higher counterfactual cost that it would face in the absence of implicit government support."






------------------------------------------------------------------------------------------

"Option-price approach: 

the future distribution of the value of banks’ assets based on the prices of options written upon its equity "

"Historical approach:

            the historical distribution of observed equity price movements."

.
Figure 3. Variation in the implicit subsidy over time


"despite their differences, all measures point to significant transfers of resources from the government to the banking system"

    costless resources ?