The same can be said of the banking system, since if we undertake sufficiently extensive reform, we will be able to reasonably negotiate the current crisis; otherwise, banks would have to ultimately focus on the battle against bad debts and on the difficulties in obtaining external funding, and the authorities would have to focus on restructuring the banks that have deteriorated to the point of being clearly inviable. However, if we take advantage of this historic moment and carry out far-reaching labour reform, we will face a more positive scenario in which Spanish firms could promptly raise their competitiveness in the difficult (for these purposes) environment of a monetary union. Spain would enter a scenario in which increased productivity would provide a significant boost to its best firms. This would be particularly positive for SMEs, which find it most difficult to take advantage of the flexibility mechanisms offered by the current institutional framework, and they would benefit enormously from the implementation of a more flexible and simpler system. Meanwhile, budgetary consolidation could be achieved without swingeing cuts in expenditure and the banking system would be in a position to support this new growth phase. It would thus be a mistake to opt for small-scale labour reform, as if we could even afford to tackle this reform slowly, in various phases over various years. This would have been possible 5 or 10 or 15 years ago, when the last expansion phase started and the need for labour reform was not pressing.
Why would the most efficient retail bankers not be able to export their  BIS Review 22/2004  1  concept, just as IKEA, McDonald’s, or American Express, to name a few other retail service companies, have done in their industries? However, there are economic obstacles related to the cost of entry into new markets. Major cross-border expansion must, with few exceptions, be made through mergers or acquisitions. The success of a cross-border deal depends on the ability to realise synergies. This takes a number of tough decisions regarding reductions in staff numbers and overlapping or inefficient systems and operations. If then to this entry cost are added extra hurdles in the form of regulations and politics it is easy to see that the difficulties related to cross-border expansion might seem insurmountable to a bank manager. On the margin, I think these extra hurdles or barriers might be more important than the inherent economics of banking. Generally, in countries where the costs of entering the national banking market are relatively low, the market share held by foreign banks tends to be higher. In the last decade, countries with less developed banking systems and few or no powerful incumbents have seen extensive entry by foreign banks. Witness the expansion by European and American banks into emerging markets, e.g. in Central and Eastern Europe and Latin America. In the EU, in contrast, national banking markets are generally well developed and incumbents are strong, making entry costs much higher.