Successive reform initiatives in this area have been aimed at prescribing certain prudential standards for the financial system and addressing certain structural weaknesses which could minimise their recurrence in future. Measures such as income recognition norms, asset classification, meeting minimum capital adequacy standards through recapitalisation and devising a supervisory framework are steps in the direction of ensuring the safety of the financial system.
However, at least some degree of aggregation is normally necessary as the causes of financial instability are often common to all banks. It is unlikely to be the occasional failure of one bank that triggers a crisis but rather a shock to the financial system as a whole, caused, for example, by an earlier asset price boom and/or lending boom.