Economist and author Pedro Gómez Martín-Romo has published a paper proposing a new regulatory framework aimed at limiting the growth of systemically important companies and reducing concentration across financial and industrial sectors.
In the paper, Regulatory Institutional Competition – The Interest Pattern, Gómez argues that existing regulatory frameworks often address market concentration only after companies have already achieved dominant positions. He proposes what he calls the “Gómez Ratio”, a capital requirement linked to market share that would require companies to increase their equity as they grow larger. The proposal is the author’s own concept and has not been adopted by financial regulators.
Existing regulation and systemic risk
The paper examines the challenges posed by systemically important companies, particularly large financial institutions and investment managers. Gómez discusses recent examples of redemption restrictions imposed by several private credit funds, including HPS Investment Partners, as well as similar measures introduced by firms such as Apollo Global Management and Ares Management, arguing that these events demonstrate the importance of liquidity management in large investment vehicles.
The paper also notes that BlackRock manages assets exceeding US$14 trillion, making it the world’s largest asset manager. Although BlackRock is subject to securities regulation, Gómez argues that large investment managers should face additional requirements because of their scale. This reflects the author’s policy recommendation rather than current regulatory practice.
Historical examples of market concentration
To illustrate how dominant market positions can develop, the paper reviews several historical examples, including Standard Oil, which controlled around 90% of U.S. oil refining before being broken up by the U.S. Supreme Court in 1911, and Microsoft’s dominance of the internet browser market during the 1990s, which resulted in antitrust actions in both the United States and the European Union.
The paper also discusses the breakup of AT&T in 1984, describing it as an example of competition authorities intervening to reduce market concentration.
Proposal for an “anti-systemic ratio”
The central proposal is the introduction of the “Gómez Ratio,” under which companies would face progressively higher equity requirements as their market share increases. According to the author, this would make further expansion more capital-intensive, encouraging companies to remain smaller or divide into more specialised businesses rather than continuing to grow into dominant market participants.
Gómez argues that this approach could reduce systemic risk while limiting the need for later interventions through antitrust enforcement or taxpayer-funded rescues. The proposal has not been incorporated into Basel banking standards or the regulatory frameworks of institutions such as the Financial Stability Board, the International Monetary Fund or the European Commission.
Broader discussion of competition policy
The paper also examines the relationship between regulation, market concentration and technological change. Gómez argues that legal frameworks should adapt more quickly to technological developments in order to prevent regulatory gaps that may allow dominant market positions to emerge.
In addition, he discusses the role of natural monopolies, state-supported industries and technological leadership in shaping market structures, using examples including public utilities, semiconductor manufacturer ASML and commercial space companies. These examples are presented as part of the author’s broader analysis and policy recommendations rather than established regulatory conclusions.
The paper concludes by arguing that stronger competition, greater transparency and higher capital requirements for large organisations could reduce systemic risks while preserving competitive markets. These proposals represent the author’s own regulatory framework and have not been adopted by financial authorities or competition regulators.
