Interconnection is the nature of the financial industry

It is very common for regulators to focus on stability of the banking sector and adjust the competition in the industry to achieve the goal. However, in other industries, our regulators encourage effective competition in most of other industries and markets. Why? Because the banking industry is too important to have any volatile. In the banking industry, the most crucial element is the interconnection within the industry. Interconnection makes all banks in the system have the characteristics of "too big to fail" and reduces the incentives of banks to compete with each other. The interconnection exists in the entire financial industry. This is a problem that I am not able to find any optimistic way to solve. Why? Because this is a very strange industry that it supplies something it also demands - funds. All banks and institutions are suppliers as well demanders, such characteristic makes banks and institutions inevitably interconnected, as they always demand each other's products. Therefore, interconnection is the nature of the financial industry.