The good news is that academic research has long been suggesting that even if financial rules were to distort the first-best allocation, the impact on growth and society in general would likely be immaterial.7 The assertion is that both bank and market-based finance tends to support economic development and living standards in similar ways.8 More recent research, however, challenges these findings.
Evidence is growing that large banking systems are associated with more systemic risk and lower economic growth, in particular as countries grow richer.