The financial environment can best be described as "dynamic." Financial innovations have been coming at a rapid pace in recent years; new financial products have been introduced and are expanding rapidly, and new institutions have taken on prominent roles in key financial markets. Financial technologies have improved as well and have the potential to contribute to the efficiency and resilience of financial markets.
However, with new products and institutions comes the potential for new risks to financial stability. As a result, we policymakers are likely to be torn. On the one hand, we may want to encourage welfare-improving innovations by limiting the extent of regulation.