Besides, if banks in particular become too large and powerful, they may extract excessive rents from the corporate sector, impose their taste for prudence on their corporate clients, or become captured by the interests of large inefficient incumbents, disrupting the natural process of Schumpeterian creative destruction. Indeed, over the last years, bank equity appears to have registered a higher average return than non-bank equity.
Third, financial development may exacerbate the trade-off between growth and stability, and so the findings of the traditional finance-and-growth literature may have been driven by studying short periods of relative calm during the Great Moderation.