2  Stimulating competition  In his book Fault Lines – How Hidden Fractures Still Threaten the World Economy, former IMF chief economist Raghuram Rajan argues that a fault line is created when two different financial systems based on different principles interact. He is referring to the contrasting cultures of the capital markets and relationship banking.
Financial market integration has certainly increased the possibilities of contagion. However, I do not believe that the “fault line” necessarily runs along the border between the capital market and relationship banking. Seen from the perspective of a universal bank, drawing a rigid distinction between capital market orientation and a banking philosophy seems a huge oversimplification.