Strong risk management is essential but faces the hurdle of the structural incentives for risk-taking implied by limited liability for individuals and by what may be a human proclivity to take risks. 29 But of course, banks that are heavily consumer deposit financed also fail from time to time, as a result of bad lending decisions.
It could be that large banks can finance themselves more cheaply because they are more efficient, that is, that there are economies of scale in banking. For some time, the received wisdom was that there was no evidence of such economies beyond relatively modest-sized banks, with balance sheets of approximately $ billion.