Moral hazard refers to the situation where an entity has the incentive to take on excessive risks because it does not fully bear the consequences of those risks. This is a common concern in sectors such as banking, insurance, and finance, particularly when entities are perceived as 'too big to fail' and expect potential government bailouts.
The term 'Too Big to Fail' (TBTF) refers to organizations, particularly financial institutions, whose failure would pose a systemic risk to the economy. This concept gained prominence during the 2008-2009 financial crisis.
