Particularly in case of EMEs, where credit market is typically bank-led, an efficient resource allocation framework is central to Governments’ efforts towards employment generation and poverty eradication. On the contrary, a weak financial sector consisting of weaker intermediaries and shallow financial markets would invariably be prone to crisis resulting from inefficient resource allocation and disproportionate risk-taking behavior.
*** The financial crisis serves as a stark reminder of the severe costs of financial instability to society as a whole. While there has been significant progress towards repairing the banking system, legacy vulnerabilities from the crisis remain. The restrictions imposed by the Bill would reduce the ability of the banking system to absorb shocks in the future.