That said, price stability and financial system stability are interdependent; for instance, under deflation where prices of goods, services, and assets fall, investment is constrained due to a rise in the real interest rate, firms' real debt burden increases, and credit costs of financial institutions rise.22 This suggests that price stability contributes to financial system stability.
They aim at establishing discipline in the conduct of banking business and promoting corporate habits that are not only fair but also transparent to market participants. In this process, regulations do also help create conditions conducive to the sound development of financial markets. Often we come across rogue shareholders and rogue board members.