And here the fact that multiple and diverse players are on the pitch is important: large banks, small banks, regional institutions and cross-border ones, banks with risky business models and banks with low-risk models. As all these banks are relevant to the stability of the system in different ways, the benefits of strict regulation and supervision also differ widely.
The costs incurred by individual banks as a result of regulation and supervision also vary, particularly the operational costs. For smaller banks, these costs, relatively speaking, are higher – unlike larger banks they cannot benefit from economies of scale. At the same time, disproportionately high regulatory and supervisory costs represent a barrier for new competitors entering the market.