Setting a ceiling on bank size

Over the course of the basketball weekend, I’d shot my mouth off about the current economic disaster and I said something I now regret.

Namely, that a government ceiling on the size of banks would be a bad thing.

After reading this MarketMover article, I’m not so sure:

As for banks competing with each other by growing, I simply don’t believe that they do. That was the point of Mike’s post, at Rortybomb: when banks get big they’re less competitive, not more competitive. And I think that Kevin is just wrong when he thinks that big customers are more profitable than small customers. Check this out, on the subject of Mexico’s biggest microfinance lender,

Compartamos:Compartamos, which had 1.16 million clients and MXN5.73 billion in loans at the end of December, saw its net profit rise nearly 28 percent to MXN1.12 billion in 2008, giving the bank a return on average equity of 44%, compared with an average for Mexico’s banking sector of 12.5 percent.

Yes, that’s a 44% return on equity in 2008. There aren’t many banks which can say that.

Yeah? Why do we care if a bank can't get bigger than a few hundred billion in size?

I'd love to hear the counterpoints, I guess.