Finally, changes in the ways savings are channeled to borrowers have also affected the role of the nonbank sector. Central banks and other policymakers need to think carefully about the implications of these changes for financial stability and the appropriate prudential regulation of nonbank financial institutions.
1 The changing business of banking Even before the recent market turmoil, it was abundantly clear that the business of banking has changed quite significantly over the past several decades. The primary impetus for change has been intensified competitive pressures from the securities markets.