Nonetheless, the largely unregulated global markets, with some notable exceptions, appear to move effortlessly from one state of equilibrium to another. Adam Smith’s “invisible hand” remains at work on a global scale. Because of a lowering of trade barriers, deregulation, and increased innovation, cross-border trade in recent decades has been expanding at a far faster pace than GDP.
Simultaneously, efforts are being made to develop infrastructure, technology and capabilities of market participants, while evaluating their ability to absorb shocks, and insisting on their putting in place robust risk management systems, since we are conscious that our overarching objective is the maintenance of financial stability. But should all this mean a total change in approach to financial innovation?