02.07.2025
A FFA's new working paper entitled "Systemically important enterprises: A fiscal policy perspective" shows how systemic importance can be analysed on the basis of economic criteria and across sectors, and conceptually classifies the range of government measures from an economic policy perspective.

When does an enterprise need state intervention? The crises over the past 20 years have increasingly forced the government into the role of lender of last resort – whether on the financial markets, in aviation, energy supply, the healthcare system or even in dealing with the damage caused by extreme natural events.
Government intervention to support individual large undertakings, infrastructure or economic sectors in times of crisis is generally based on the understanding that private forces are unable to cushion the blow and that the dynamics of a loss of output jeopardise the stability of the economy as a whole, which can lead to unacceptable costs.
But when is a sector system-critical or an undertaking "too big to fail", "systemically important"? And how can we prevent the government from using its backstop instruments to create incentives that provoke excessively risky corporate decisions?
The FFA's new working paper entitled "Systemically important enterprises: A fiscal policy perspective" explores these questions. The paper takes a cross-industry approach to analysing when government intervention is appropriate for systemically important enterprises and aims to provide a criteria-based framework for economic policy decisions.
Enterprises are only systemically important in rare cases
In view of this, the authors define the sometimes vague terms "system criticality" and "systemic importance". They show that the criticality of infrastructures and the systemic importance of undertakings can be determined using valid criteria that can guide economic policy decisions. An enterprise is considered systemically important if three criteria are met:
- size and market concentration,
- interconnectedness and
- lack of substitutability.
The exemplary application of these criteria to the large enterprises in the highly critical sub-sectors suggests that the first two criteria are often met, while this rarely applies to the criterion of lack of substitutability. Only a few large enterprises can therefore be categorised as systemically important – typically in the financial sector. This means that airlines or large electricity undertakings do not, in principle, fulfil the criteria for systemic importance, as takeovers would be possible within a reasonable period of time. Nevertheless, depending on the cause of the crisis, government aid should be assessed on a case-by-case basis.
Building on this, conceptual considerations on government measures in the context of system criticality and systemic importance are made. The government already has a broad range of measures at its disposal, which vary in terms of the level of intervention, timing of intervention and design. However, according to the paper, particularly far-reaching backstop instruments such as public liquidity backstops and other financial rescue mechanisms must be flanked by comprehensive stipulations that include strict conditionalities, fees and high transparency requirements. The aim is to reduce moral hazard incentives and protect taxpayers from assuming excessive ultimate liability exposure.
Brändle et al. (2025) Systemically important enterprises: A fiscal policy perspective (PDF, 1 MB, 02.07.2025)Working Paper FFA No. 28
Last modification 02.07.2025