Megainstitutions and Financial Instability: The challenges for prudential regulation
Abstract
This paper analyses the recent process of the financial concentration in major industrialized
countries. It reveals that the formation of large diversified financial conglomerates
consolidates the so-called “full-service banking or financial supermarkets” in the United
States and the Allfinaz in Europe. It also evaluates the role played by these megainstitutions
in the intensification of financial instability due to increasing potential moral hazard and
the systemic risk. Finally, it deals with difficulties faced by authorities in the supervision and
control of these megabanks.
JEL Classification: G21; G34; L40.
Keywords: Mergers and acquisitions banks financial instability corporate governance