How did the risk of banks change after the 2008 crisis?

They are typically under more regulatory scrutiny and must hold larger reserve requirement than they did pre crisis. 2008 was largely a liquidity crisis so higher reserves and more liquid assets should help.

This question depends on what type of bank you're asking about. In general, risk to small banks hasn't changed, but risk to large (systemic) banks is significantly reduced.

For a bit of history, prior to and during the financial crisis, the concept of 'creative destruction' was part of the ethos: Entities come and go, and the process of building, and the eventual collapse, of these entities was a good thing. From the ashes of the fallen giants new and stronger entities would emerge.

Even during the financial crisis this ethos was part of the common narrative. Small banks were failing, but the market decline was 'normal'. Even larger players like Bear Stearns (April 1, 2008) and Countrywide (July 1, 2008) failing didn't really move the market. Even Fannie Mae failing didn't have a major effect on the market. When Fannie failed on September 7 the DOW was at 11224. A week later it was 11421.

It was really only after the failing of Merrill Lynch and Lehman Bros over the course of 2 days that people really started panicking. In order to prevent Moral Hazard, the predominant thinking was to let the market do it's job and let over-leveraged firms fail.

This thinking ended with the panic that followed these two IB failures. Wachovia failed shortly after, but that was the last major bank failure of the crisis (at least in the US). TARP was quickly enacted as funding of last resort for large 'systemic' banks. If you were a small bank you failed (by the hundreds), but large banks were bailed out.

Since then the trend has been, as predicted by the moral hazard hawks, for banks to grow bigger. If a small bank will fail but a large bank will be rescued, the only logical choice is to grow bigger.

I'll just add a couple of things to what DHallahan wrote. Firstly, it's capital requirements that were raised not reserve requirements. They're a bit different, you can read about that online. Secondly, there's some debate about whether 2008 was just a liquidity crisis. Certainly a liquidity crisis was part of it.

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