Well that's precisely what we were doing until 2018 when lobbyists and the Trump Administration carved out exceptions for banks with less than (or equal to) $250 Billion in assets (see link above). So a more pertinent question from my perspective is: "Who's brilliant idea was this anyway? /s"
But if "the answer" you are referring to is to prevent consolidation in banking, then I think it's not quite as cut-and-dry. Regulation, especially risk-management regulations, can act as barriers to entry and create an environment that favors larger/established institutions leading to market consolidation. As an over simplification by a layman, it could look something like:
- Higher regulation constrains profitability and raises fixed costs of running a bank (compliance burden).
- This means that the amount of assets under control by a bank has to be higher in order for the bank to be profitable.
- This higher floor reduces the likelihood new banks start (since the asset requirements to be profitable are higher).
- Existing banks, in an effort to increase profits, acquire and merge with other banks.
These final two trends (less banks starting, more MnA's) are what could drive market consolidation. In a lot of ways Airlines are an example of this in a different industry.
I am definitely _not_ suggesting small banks should be exempted from Dodd-Frank like they were. I actually found the 2018 deregulation disturbing and disappointing. I am only trying to illustrate that even if 2018 hadn't happened, I don't know for sure if there would be more competition in the banking industry. (Only that the banks we do have would be less risky)
But if "the answer" you are referring to is to prevent consolidation in banking, then I think it's not quite as cut-and-dry. Regulation, especially risk-management regulations, can act as barriers to entry and create an environment that favors larger/established institutions leading to market consolidation. As an over simplification by a layman, it could look something like:
These final two trends (less banks starting, more MnA's) are what could drive market consolidation. In a lot of ways Airlines are an example of this in a different industry.I am definitely _not_ suggesting small banks should be exempted from Dodd-Frank like they were. I actually found the 2018 deregulation disturbing and disappointing. I am only trying to illustrate that even if 2018 hadn't happened, I don't know for sure if there would be more competition in the banking industry. (Only that the banks we do have would be less risky)