concentrated ownership? i have an open mind on this issue, too. both alternatives have their advantages and disadvantages. a broad ownership may better protect the interests of the minority shareholders, but if financial problems occur the majority owners have stronger incentives to provide capital injections. the governance of a bank is sometimes promoted by having strong owners, but there are also examples of strong owners misusing the bank for their personal purposes. all in all, you should be open to different forms of ownership but monitor them closely. should you allow different forms of banks, such as commercial banks, savings banks, credit unions, development banks and micro - finance institutions? in my view : yes, of course. competition is best served by having a range of bank ownership structures such as shareholding, mutual ownership, nonprofit organisations, etcetera. but having said this i want to warn against certain practices i have experienced in some countries which i would call “ compartmentalization ”. this happens when the legislation prescribes unnecessary and ineffective borderlines between the allowed activities of defined banking categories. usually, the intention is to ensure limited competition and high profits for the various categories. such restrictions are in effect a subsidy to the banks and they are harmful to the consumers and to the overall economy. the rule - of - thumb should be that any bank should be allowed to conduct any of the generally regulated bank activities if it can prove that it possesses adequate competencies, systems and resources. should there be one set of prudential rules for all institutions conducting bank - like activities or should you differentiate? could there be “ light - touch supervision ” for small and non - complex institutions for instance in micro - finance or local credit unions or exchange houses? there is no obvious answer to these issues. on the one hand you want to create a fair level - playing field for all bank activities which call for equal treatment. but on the other hand there is no necessity to burden small institutions with the elaborate regulations intended for large and complex banks. as i noted before, there must be a reasonable relation between the amount of regulation and its cost to the institutions. consequently, i would accept the case for lighter supervision of small and non - complex institutions, but there must always be adequate supervision to ensure discipline also for those. even when a small institution fails it causes disruptions and a loss of confidence in banks in general. we have recently had bad experiences in sweden, so if you intend to introduce risk - based supervision i advise you to do

your banking system. where there are shortcomings you must deal with these in the appropriate ways, such as through legislation. while waiting for the preconditions to improve, the authorities and the banks must compensate for the shortcomings. let me stress this again : your banks, as well as other financial institutions, cannot operate efficiently and soundly in an environment where the necessary preconditions are inadequate. regulation banks perform special and unique services to society, such as accepting deposits and transforming them to credits, and for providing payment services. the combination of receiving short - term deposits and extending long - term loans makes banks inherently unstable. for this they may receive some protection by the public, such as the possibility of liquidity support and depositor guarantees. but the price for receiving protection is that banks must be subject to some regulation and supervision. having acknowledged this, i am not a fan of extended bank regulation but rather regulation of a limited and transparent type, intended to protect society against major incidents and costs but allowing banks to conduct and develop their business as flexibly as possible. clearly, bank regulation must aim at promoting efficiency and stability. only efficient banks will remain stable in the long run. the old - fashioned type of regulation forcing banks to do business on other than market - oriented terms must be abolished. if the government wants to subsidize certain activities, such as banking for people in remote geographical locations, mortgage lending on favourable terms, or lending to important borrowers or projects, the costs for this should be transparent and show up as a part of the fiscal budget. such activities should not be conducted by directives from the government to the banks. another type of regulation which is becoming increasingly obsolete and inefficient is when the authorities try to micro - manage the behaviour of the banks by setting upper or lower limits on fees, deposit rates, lending rates, and credit expansion. the situation in the economy changes so rapidly that the authorities will never be able to catch up and their actions could then be more harmful than helpful. the type of regulation i would like to promote is flexible. the regulation will not obstruct developments in banking while at the same time it prevents banks from behaving in a way that might harm customers or themselves, other institutions or markets, or society as a whole. without going into detail i could mention the new basel ii framework for capital requirements on banks as an example of such flexible regulation. under basel ii, banks may assume