The financial crisis that the world has been living since the summer of 2007 has shown the importance of the financial sector for the proper functioning of economies. For the European countries the financial crisis has signified a reduction in the volume of credit granted, decreased activity in international markets and an increase of risk and instability. Financial entities have seen how they have had to change their way of operating, adapting to a situation in which there exist difficulties in obtaining finance in international markets, both in volumes and in terms of interest rates, and in which the levels of risk are substantially higher. Moreover, financial entities degree of risk aversion has increased considerably, which has translated into a hardening of credit conditions.
The experience of these two years of crisis shows that its intensity has been different depending on which countries are analysed. Thus, countries like the United States, the United Kingdom, France and Germany have needed the recapitalisation of part of the financial sector (see European Central Bank, 2010). However, in other countries, such as Italy or Spain (except in the cases of the savings banks of Caja Castilla La Mancha and CajaSur) though government support has taken the form of guarantees for the issue of debt and the acquisition of financial assets, the public recapitalisation of financial entities has not been necessary at least up to mid 2010.
In the current context of economic and financial crisis, it is of special interest to analyse the importance of size, given the habitual connexion with systemic risk. In the recent discussions of the G-20, of the Financial Stability Board, of the BIS, etc. specific proposals are aimed at preventing the possible systemic risk of the biggest banks, with higher requirements in terms of capital or restructuring plans in the event of failure (with the so-called living wills).
Though our a priori is that this connexion is imprecise (since what makes a bank systemic is not so much its size, as the complexity of its operations, of the products with which it works, the difficulty of controlling the risks assumed and of its management as a whole), the importance of size (with such important implications in terms of too big to fail ) may have consequences for banks' market power, this being the objective of this paper.
