The co-existence of and the competition between the two systems for allocating financial flows and risks in the economy should enhance economic efficiency, provided appropriate regulations, monitoring and supervision create the conditions for fair competition. Against this background, the banking sector has experienced major changes. Consolidation in the banking industry has been substantial.
At the same time, banks have diversified their activities through mergers or by creating bank insurance groups. They have also been trading parts of their balance sheet assets and risks through financial markets. In addition, they have expanded their activities abroad, although further developments towards cross-border mergers and the creation of larger Europe-wide banks can be expected.