BIS Review 86/2008  1  result, they found themselves far better off financially than they probably would have been otherwise. As this recent experience suggests, financial liberalization and innovation bring many benefits but can also create information and incentive problems that lead to mistakes.
When mistakes of this nature become evident, financial markets can seize up, with potentially significant adverse consequences for the economy. Advances in information technology and financial innovations in recent decades encouraged new lending products and faster securitization of debt.