Banks have a total market share of over 50 per cent, while mortgage companies and finance companies have a combined share of 14 per cent. Growth in financial markets makes it easier to channel savings surpluses to customers with sound investment plans. It also makes it easier to diversify risk. Both enhance the economy’s growth potential. At the same time, a larger financial sector may increase the consequences of financial instability for the real economy. 1/6  As a result of globalisation, debt and financial assets are now more widely distributed across countries. Home bias has declined. This has reduced the risk in the financial system and improved the relationship between risk and return. The Government Petroleum Fund has contributed to a sharp decline in home bias in Norway. In recent years, Norwegian life insurance companies have also invested more of their capital abroad. Tendency towards larger entities and increased concentration National consolidation In the past few years, domestic mergers and acquisitions have been a central feature of the European banking industry. Concentration, which can for example be measured by the size of the five largest credit institutions, varies considerably across countries. However, concentration generally appears to be higher in small countries than in large ones. It is not particularly high in Norway, and is lower than in Denmark, Finland and Sweden. Developments in the number of credit institutions are another measure of market consolidation. The total number of credit institutions in the euro area has been sharply reduced over the past eight years.

6  See Financial Stability Board (2013), “Progress and Next Steps Towards Ending “Too-Big-To-Fail””. 7  For example, at the FDIC Systemic Resolution Advisory Committee Meeting on 10th December 2012. The webcast for the meeting is available online at: http://www.fdic.gov/about/srac/2012/2012_12_10_agenda.html  BIS central bankers’ speeches  3  (5)  The resolution agenda is not just about banks and dealers. It is about central counterparties too, for example  Banks became TBTF by accident. The G20 Leaders having mandated that standardised OTC derivatives must be centrally cleared, there is a risk that central counterparties (CCPs) will come to be seen as too important to fail as a matter of policy. That makes it incredibly important that CCPs are robust, effectively managed, effectively supervised, and have first rate recovery plans. And, beyond that, they absolutely must be subject to a credible resolution regime. I worry that CCPs are “for profit”, or are typically part of “for profit” groups. If a CCP fails and it turns out that its risk management was slack, this point is bound to come up in the public response. Policymakers should think about that now in the context of the governance structure they want for CCPs embedded in vertically integrated groups. Meanwhile, work is underway in CPSS/ IOSCO8 on loss-allocation rules. Unlike banks, CCPs are essentially rule-based machines for netting and allocating risks. Those rules need to be enriched so that it is clear what happens when, due to a member’s default , both the initial margin and default fund are exhausted.