First among these is ongoing financial innovation, which has caused a virtual revolution in both financial instruments and markets. As a result, the markets and institutions that must be regulated have changed substantially over time. At the same time, regulation has evolved, as the regulators have learned the lessons from the recent spat of banking crises. As a consequence of these experiences, regulation has become more sophisticated, with the introduction of capital requirements and more complex restrictions on operating procedures.
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An Overall Perspective on Banking Regulation
February 2002
WP 02-01 – Recently, the theory of banking regulation has undergone important changes. This has been the consequence of a number of compounding effects that have been occurring in the financial sector.