Competition has been perceived with suspicion, and even suppressed for extended periods, in banking. After banking was liberalized, a process which started in the 1970s in the United States, it has become much more unstable, culminating with the 2007–2009 crisis which resembles the systemic banking problems of the 1930s.
Is competition in banking good for society? What policies can best protect and stabilize banking and the financial system without stifling it? Has excessive competition helped the overexpansion of credit in the real state sector? Competition has a bearing on all the major perceived failures associated with banking: excessive risk taking by financial intermediaries, credit overexpansion, and bank misconduct (e.g., the Libor manipulation). However, we have to ascertain whether competition is responsible for instability, or instead we have to blame inadequate regulation and supervision.