Post-financial crisis times : only a short phase of re-intermediation and re-direction to boring banking business models? : regulatory burden, fintech competition and concentration processes

The analysis highlights the aspects of diversified market structures and of local, low-distance banking as advantageous for financial stability. Heterogeneity protects from uniform market behaviour. Local banking can better overcome the problem of asymmetric information, particular in SME lending. Moreover, connections to other socio-political aspects must be factored into the assessment: financial inclusion, presence in rural areas, and depletion of regional disparities. The vast regulation and Europeanisation of supervision, however, -so far neglecting differences in risk profiles and bank sizes-have imposed a higher minimum business size, which led to an extensive merger trend, especially negatively affecting smaller and regionally focussed credit institutions. So it seems that the process of re-intermediation and re-directing banking business back to deposit-based lending, taken place in the aftermath of the financial crisis, was of short length only. Regarding recent developments, we argue that FinTech applications are expected to complement, not to replace, existing banking and financial services. However, we warn against existing regulatory loopholes and regulatory arbitrage for FinTech applications and BigTech approaches.