Yes, concentrating all the power and all the risk in a few giant banks that also tend to do risky investments as well seems like a terrible idea for both customers and stability.

Canada has a system like this, although it is very well regulated and hasn’t so far blown up. What it does do though is give very little competition or choice to the consumer. The Canadian bank oligopoly is only slightly less horrible than the Canadian telecom oligopoly. Both are as anti free market competition as you get. It looks like the U.S. banking system is headed the same way.