This paper examines the impact of the risk-based capital (RBC) requirements on bank cost efficiencies. We take into consideration both on- and off-balance sheet (OBS) products and allow product mixes to differ across banks and to vary over time. Our empirical results suggest that the cost structures of large banks are significantly different during the pre-RBC and post-RBC periods. That is, the RBC change seemed to reduce the optimal bank size that achieves maximum scale and scope economies, so that some of the large banks that previously were efficient became too large and inefficient. The results suggest that regulations that encourage large banks to expand their production and product mixes any further will likely result in a less efficient banking industry.