The value of the banking franchise made stockholders and managements unwilling to take risks with the continued viability of firms under their control. And if serious losses did occur, rescue by other firms was likely, either in order to acquire a valuable franchise, or as part of an implicit quid pro quo for the maintenance of their own favoured status.
Two forces came to the fore in the 1970s and subsequently that made this regulatory approach unsustainable. One was the growing influence of the free market philosophy, and the accompanying dismantling of controls and restrictive practices. This affected the willingness of public authorities to limit competition in the name of stability.