1  BIS Review 34/1999  Why all this concern about safety? And why do we regulate this particular industry more closely than virtually all others? There are two main reasons. First, the financial industry is the repository for the wealth of a large number of small savers.
For most of these savers, it is very difficult and costly to make a personal judgment of the risks involved in doing business with a particular bank, credit union, or insurance company. The second reason has to do with what we call systemic risk, or contagion. This refers to the risk that problems in one particular financial institution will be transmitted to others.