What this means, therefore, is that the financial sector is lacking a key aspect of an effective competitive environment – the possibility of businesses exiting the market. A major financial institution exiting the market can ignite a systemic crisis, leaving the state with little choice but to intervene in order to prevent matters going from bad to worse.
And then the taxpayer is left to foot the bill. The no bail-out principle has lost all effect. As Walter Eucken might have put it, those who benefited did not bear the costs. This very phenomenon has come into play during the crisis.