In a recent study (Tomaso Spingardi and James Foster, "Are banks going on a diet?", University of Genoa)
I explored in some detail the concept of limiting the size of a financial institution, which has its own attractions. of course, as always, the devil is in the execution. there is plenty of academic work on whether size matters for efficiency. no conclusive evidence. surprised? more to the point, in the financial sector, size is most difficult to define. Misterious diseases like kurtosis and skewness are hard to measure, never mind manage. correlations have proven to be more an art than a science. and how about managing the interlinks between financial institutions? in the house of cards of financial markets are we sure that managing the links between a plethora of mid size players will be any easier than checking on a few semi-giants?
I confess i don’t have straight answers to my own questions.
good luck to the regulators. and to all of us!