At Growthology, Paul Kedrosky contrasts the rapid turnover and transformation in the venture capital sector vs. the stodginess and stability of traditional banks:

Why is venture different? Why is this rapid failure/speciation/innovation sequence not playing out in banking? In part, and not to get all deregulatory about it, because we don’t let it. The most important difference between venture and other parts of the financial services system, especially banking, is that the former isn’t regulated (okay, regulated very, very lightly), while the latter is highly regulated. That regulation, while well-intended, has the effect of straightjacketing the industry, meanwhile preventing usurpers and change and innovation, and making banks that are already too big to fail, too bigger to fail.
It is wrong and simplistic to say that if we just deregulated banks that all would be well. But it is also true that the path to having half of the banking industry (in assets and firms) shrink away, with no societal consequences (as is happening in venture), could be at least informed by what is happening right now in U.S. venture capital.

I hope that Kedrosky writes more on this subject. While it might be wrong and simplistic to say that deregulation is the only answer, I’d like to see a more detailed treatment of what traditional banks can learn from our approach to regulating VCs.