Although banks remain at the centre of the financial system, they are much more dependent on financial market conditions than in the past. Second, our financial system is far more closely integrated with the rest of the world than it used to be. On the one hand, this provides both profit opportunities and permits a more ample diversification of risk.
On the other hand, it makes us more sensitive to shocks from abroad. Against this background, I believe it is worthwhile expanding the basic problem of the monetary constitution as described by Lutz. Whereas he concentrated on bank balance sheets we have to pay special regard to the ever increasing importance of financial markets.