The capacity to innovate of financial institutions, the potential for regulatory arbitrage, and their potentially dangerous effects to the whole financial system provide a rationale for allowing the agencies on the financial safety net to expand and contract the regulatory perimeter (i.e. to select what institutions and activities should be regulated) in order to promptly react to new kinds of risks as market develop.
In the inter-bank segment, the turnover has moved up from $ 103 billion in 2002-2003 to $ 134.2 billion in 2003-2004. Consequently, the average monthly total turnover increased sharply to $ 174.7 billion in 2003-2004 from $ 130 billion in the previous year. The inter-bank to merchant turnover ratio hovered in the range of 2.9 –3.9 during the year.