Indeed, banks and banking groups have continuously grown over the past decades. Reasons are mainly returns to scale in the banking industry which make larger banks more efficient than smaller ones, but also a tendency of national governments to promote and protect national champions.
In some cases, banks have grown so much that their failure would, on the one hand, endanger the financial system of several countries at the same time, but on the other hand, be too large for the national government of the home country to be supported in case of stress13 and thereby causing or exacerbate funding problems of the sovereign, which might further destabilize the banking sector.14 For both reasons, a euro area wide resolution authority would be very beneficial.