The rally in U.S. banking stocks hinges on expectations that the Trump administration will relax or even remove regulations imposed on the sector in the wake of the 2008-09 global financial crisis. The danger is that since big banks are still not too big to fail, deregulation, both in the U.S. and globally, could trigger another financial shock.
A large banking system is not necessarily problematic. For example, in the U.K., reflecting the status of London as a major global financial center, financial services contribute significantly to economic activity. Financial and insurance services contributed £125.4 billion in gross value added (GVA) to the U.K. economy, or 9.4% of the U.K.’s total GVA, around 46% from London alone.
