The asymmetric burden of regulation: will local banks survive?

The re-regulation wave following the recent financial crisis has contributed to produce a complex system of new rules and controls. The paper argues that the burden of this new regulatory system is asymmetric and penalizing for small banks. This conclusion is corroborated from the preliminary results of a questionnaire on the impact of regulation on different types of Italian banks. Asymmetric effects on banking structure produce related asymmetries on firms and regional economies, in light of the fact that small firms and peripheral regions are highly dependent on bank credit and need strategic proximity of banking structures. When firms and regions are heterogeneous, the review of the literature on different countries and on different periods of time suggests the importance of differentiated banking models. Bank size, organization and governance should be evaluated in relative terms reflecting various heterogeneities of clients and regions. Consequently, a regulatory system should not favor one particular bank type but should aim at achieving a more symmetric distribution of the regulatory burden.