Why the big lenders are destined to get even bigger

Severe banking crises bring painful and long-lasting disruptions. But they also lead to surprises. The lessons learned in the immediate aftermath bear little relationship to the eventual outcome.

There are immediate and obvious answers to the question of who was to blame, but they rarely correspond with the new shape of the financial landscape that ultimately emerges.

The crisis that began in 2007 originated in the sub-prime mortgage sector in the United States, and in US banks that were "too big to fail", prompting many observers at the outset to predict the end of American financial capitalism. But the banks that were most affected were elsewhere, and the long-term winners will be a few American banks - including some of the most notoriously weak banks - which will get bigger as a result of the crisis. The explanation of why the obvious lessons of the crisis are being not drawn lies in the curious character of financial activity. Banking is inherently competitive; but at the same time, it is not an industry where competition ever worked very well.