2 Regulatory responses Digitalization and increased competition through new market entrants is only one of the key trends affecting market structure. In addition, post-crisis financial sector reforms affect the competitive structure of banking markets: More stringent capital requirements, as a core reform element, aim at shifting activities towards bettercapitalized banks.
Policies reducing implicit subsidies for systemically important financial institutions (“ending too-big-to-fail”) affect the market power of banks that benefited from such subsidies. For reforms strengthening bank capital to be effective, they need to be accompanied by reforms of resolution frameworks which enable weak financial institutions to exit the market without adverse effects on financial stability.