Financial risk-sharing benefits and, more broadly, financial integration are deeply rooted in the soundness of institutions and policy rules. This is in line with the already mentioned empirical findings on the lasting growth effects of capital flows, which depend on institutional thresholds.
Sound institutions and policy rules are necessary to guarantee clear definitions of property rights and procedures in case of financial stress, to ensure the stability of the domestic financial 2/4  BIS central bankers' speeches  system through regulation, supervision and resolution frameworks, to mitigate the cost of crossborder and cross-currency transactions, and to create a level playing field for financial tax regimes.