The more effective is market discipline and the more effective are capital standards, the less there is a need to invoke the more intrusive and burdensome components of the regulatory portfolio. For this reason, I focus particularly on enhanced market discipline and reform of capital standards.
But financial modernization legislation has also focused attention on the role of activity limitations, restrictions on where activities are conducted within the banking organization, and the appropriate supervisory framework for more diversified financial service organizations that would emerge from such legislation.