It has done so by firstly, magnifying the channels through which shocks are transmitted across borders, and secondly, in the absence of harmonized financial legislation, by providing more room for regulatory arbitrage in the system. Fortunately, an effective but still largely informal system of information exchange between regulators has served to contain the potential damage.
It is gratifying indeed that we can have the amount of regulatory cooperation that currently exists, even in the absence of appropriate region-wide legislation. Capital market integration has been much less than that achieved in the banking system. Specifically, there has been limited integration of bond and equity markets in the region.