I am convinced that if banks neglect their primary activity of due diligence, and if they come to abuse risk control techniques, liquidity creation and arbitrage opportunities, finance will do more harm than good to the economy. And crises of the magnitude that we have witnessed become unavoidable. This is not to say that financial markets are solely to blame for the financial crisis.
Policymakers, regulators and supervisors also bear some responsibility for the incidents that led to the most severe financial crisis since the Great Depression. But understanding the impact of the paradigm shift of private finance in recent years demands a deep introspection into the inner mechanisms of financial economics. 1.