Our own banking system has not been immune; it, too, has become increasingly concentrated with a small number of very large banks operating across a wide range of product and geographic markets. Their operations are tremendously complex and sophisticated, and their significantly different strategies add a high degree of heterogeneity to their operations.
At the same time, significant weakness in one of these entities, let alone failure, has the potential for severely adverse macroeconomic consequences. It seems clear that the regulatory framework should encourage these banks to adopt the best possible risk measurement and management techniques while allowing for the considerable differences in their business strategies.