Laeven, Luc and Ratnovski, Lev and Tong, Hui, Bank Size and Systemic Risk (May 15, 2014). Available at SSRN: http://ssrn.com/abstract=2437729

“Large banks are riskier, and create more systemic risk, when they have lower capital and less-stable funding. Large banks create more systemic risk (but are not individually riskier) when they engage more in market-based activities or are more organizationally complex. Traditional bank regulation, which focuses on individual bank risk, may be insufficient for large banks. Additional regulation, based on systemic risk considerations, is needed to deal with the externalities of distress of large banks. This may include capital surcharges on large banks and measures to reduce their involvement in market-based activities and their organizational complexity.”