Thus, in the eyes of the markets these banks enjoy an implicit  BIS central bankers’ speeches  1  state guarantee: in case of trouble, the state would feel compelled to step in and rescue the distressed bank. Yet this implicit state guarantee creates flawed – and dangerous – incentives.
If a bank can be sure of state support when it gets into difficulties, it will no longer see risk and return as being two sides of the same coin. Essentially, this means that profits from risky business operations remain with the bank, while the taxpayer is left to shoulder potential losses: this is an unjustifiable scenario.