Interconnectedness also increases the risk of bank failure because it increases banks’ opacity which can lead to the loss of investors’ trust thereby making banks more prone to runs. Thirdly, there have been competitive distortions via explicit and implicit subsidies, which reduce both internal market efficiency and the level playing field. For instance, the availability  9  4  See e.g.
Shin (2010): “Macroprudential policies beyond Basel III”. BIS central bankers’ speeches  of insured deposits to fund other, more risky, banking activities has skewed incentives and competition. Banks’ incentives to sound long-run risk management have also weakened.