Question - The larger the bank the better is the ability to diversify. As a diversified portfolio of assets is a public good, regulators should not limit the size of banks, despite the significant negative externalities failures of larger banks tend to impose on the public, discuss.

Assessment criteria:

Demonstrated knowledge of the nature of a bank, financial risks and asymmetric information.

Logical inferences drawn from information presented and appropriate justification of stance taken.

Overall presentation of the argument is relevant and appropriate.