One of the most important reasons for this is the prevention of regulatory arbitrage. This applies not just to the relocation of business activities from one jurisdiction to another, but also to shifts between different sectors of the financial system. For instance, as already mentioned, tightening banking regulations may well push activities towards the shadow banking system.
The Committee on Fuller Capital Account Convertibility (CFCAC) chaired by Mr. S.S. Tarapore has also made recommendations for development of financial markets  BIS Review 32/2007  5  including the foreign exchange market. Several measures have been taken to further liberalise the extant regulations and thereby improve the structure, integration and efficiency of the markets.