For this essential function of a modern market economy, we need investors and stock exchanges such as the Bombay Stock Exchange, as they are the economic equivalent of political checks and balances. The only way to achieve that, however, is to give the no bail-out clause in the Maastricht Treaty more credibility again.
This meant that during the 1980s the banks were able to grant loans on doubtful and sometimes even directly unsound grounds without any supervisory intervention. In addition, in many cases the loans were poorly documented. The lesson from this is that much must be required of a supervisor operating in an environment characterised by deregulated markets. 2.