As a result, financial sector balance sheets are expected to expand substantially in most of the new Member States over the next decade. Similarly, bond and stock markets are likely to develop significantly, along with life insurance companies and pension funds.
Against this background, a key policy challenge in the new Member States is to safeguard the soundness of the banking system and the robust and stable development of financial markets. In fact, there are several potential stresses that could arise as financial systems expand, especially in an environment of capital mobility and financial market integration.