First, reforms should  BIS central bankers’ speeches  3  strike an effective balance between the benefits of market-based financing, including competition, innovation and diversification, and the risks related to regulatory arbitrage and systemic vulnerabilities. Second, given important differences in the structure of market-based financing across countries, the best approach to mitigating systemic risks in this sector is likely to differ across jurisdictions.
And third, the best approach will be the one that is adaptable, since changes in regulation and innovation can lead to rapid expansion and mutation of market-based financing activities. Reducing contagion and spillovers Reducing contagion and spillovers when accidents do happen has two critical elements. First, resolution.