But the greater the degree of leverage in an economy, the greater its vulnerability to unexpected shortfalls in demand and to other miscalculations. Although the fears regarding business leverage have been confined mostly to specific sectors in recent years, concerns over potential systemic problems resulting from the vast expansion of derivatives have reemerged with the difficulties of Enron.
Some recent research suggests that a banking sector beyond size may also be harmful to a long-term economic growth. There are several potential reasons for that: –  An overexpansion of banking may lead to a misallocation of financial capital towards housing loans and away from corporate lending.