This clearly placed a heavy burden on the risk management procedures of large financial intermediaries. The evolution of the financial system not only facilitated an expansion of the array of financial assets available to investors but it also seeded the fragility that later materialised in the unprecedented speed and reach of contagion during the unwinding of leverage.
So as to avoid the risk of any misinterpretation of my views on financial development, let me be crystal clear on this: I share the view that modern financial intermediation has proven that it has the potential to effectively spread risk and it has undoubtedly promoted economic efficiency and provided cheaper capital to productive sectors that would have otherwise not had access to any.