There should be no sharing of fiscal risks without democratic decision-making and accountability. Money market functioning will also be affected by the incoming regulation. I have in mind in particular the new set of liquidity standards proposed by the Basel Committee, 18 the moving of over-the-counter derivatives trading towards central counterparties (CCPs) and the reform of the shadow banking sector.
The aim of the current regulatory reforms is to establish an incentive-compatible regulatory framework as well as to encourage banks to adopt business models that allow them to limit their risks and fulfil the regulatory requirements without relying excessively on central banks as liquidity providers.