In fact, the ability to borrow freely in interbank markets allowed local banks to increase lending towards favoured domestic sectors such as real estate. This is essentially what we saw in Spain and Ireland. In the process, financial integration concentrated rather than diversified risk.11  4  Demyanyk, Y., C. Ostergaard, and Bent E. Sørensen, 2008.
2  BIS Review 49/2010  raise substantial amounts of new equity capital and, in many cases, to repay government capital. The Federal Reserve and other bank regulators continue to encourage the banks to build up their capital, ensure that they have adequate liquidity, improve their risk management, and restructure their employee compensation programs to better align risk and reward.