As it grew in complexity the systemic risk involved introduces an element of public good considerations. It is therefore understandable that it became an activity subject to public regulation, monitoring and supervision.
The rationale for regulation rests on two types of justifications: first, the important externalities associated with the systemic role of the financial sector and second, the nature of an activity where asymmetries of information create the possibility of some market failures [see 1 Llewellyn (1999) for a good analysis of the issues] History shows that regulation and supervision of the financial sector evolved in response to crisis or major episodes of turbulence.