Much of the prosperity in market economies has been possible because of the animal spirit, and regulations should not suppress animal spirit, just because of the potential risks of instability and crisis. The excesses in the financial systems often create a natural process of creative destruction, which surfaces in the form of a crisis to ensure a forced clean-up of the systems.
In the process of evolution of financial systems, regulatory and supervisory architectures help in preventing crises as long as sound principles are generally adhered to. When unsound practices lead to a crisis, the creative destruction process makes the systems not only to recover from the crisis but also to become more robust and full-proof.