The Lehman bankruptcy with ensuing financial instability and loss of real output brought forth several shortcomings of the international financial architecture that exposed risks resulting from a lack of a policy framework for dealing with SIFIs. In the pre-GFC era it was precisely these institutions that were deemed quite invincible.
However, the huge costs of implicit government guarantees of not letting a SIFI to fail and their adverse impact on global financial stability, raised serious concerns on “Too Big to fail” (TBTF) status of SIFIs. Post crisis era witnesses increased discussion on changing TBTF status of SIFIs and for devising a resolution regime as well as safe exit mechanisms for these entities.