The banks became more ‘efficient’ intermediaries but, to the extent the risk of failure has increased because of lack of depositor discipline on the banks and risk has been moved elsewhere (to taxpayers or deposit insurance funds), efficiency gains are more apparent than real.
The predisposition of governments to bail-out the creditors of failed banks makes all the difference to both the sign and magnitude of the impact of regulation on the efficiency of liquidity transformation and credit origination in the economy.