A recent growing body of research supports the view that during that period market forces were fairly effective in assuring that individual banks constrained risktaking to prudent endeavors. Nonetheless, the then nascent system as a whole proved quite vulnerable to various macroeconomic shocks essentially unrelated to the degree of banking regulation.
I shall conclude by drawing some implications for how banking regulation needs to evolve in the future, with greater reliance on private market regulation. The Roots of Banking Many of the benefits banks provide modern societies derive from their willingness to take risks and from their use of a relatively high degree of financial leverage.