Safety Net Subsidies and Organizational Form Beyond regulatory structure, financial modernization--the linkage of banks to a wider range of financial activities--also raises organizational structure issues. This issue is closely linked to the subsidy provided by the federal safety net, a much discussed topic in recent weeks.
As a consequence the risk bearing capacity of financial institutions was high and financial systems were very stable. This situation has radically changed since the mid seventies. After the fall of the Bretton Woods system which was accompanied by a process of wide spread financial deregulation interest rate and currency risks increased substantially and financial systems became much more competitive all over the world.