A more developed and efficient financial system is likely to contribute to a more effective, harmonised and smooth transmission of the single monetary policy. In addition, the stability of the financial system is also a crucial concern for central banks and for the economy as a whole.
In principle, deeper and more complete financial system should provide a number of social benefits, including better risk hedging and risk diversification that render economies less vulnerable to disturbances. However, there have long been concerns that some financial developments may lead to increased speculative behaviour, market volatility and, ultimately cause or exacerbate financial crises.