BIS Review 49/2004  1  Financial crises the world over have revealed that weak financial systems and their supervision are the most important factors contributing to macro instability. As East Asia discovered so painfully, the health of the banking system underpins that of the economy as a whole.
Financial markets are different from product markets and therefore, greater liberalisation goes along with deeper supervision and higher degree of regulation. Any destablisation in financial markets affects even those who are not in financial markets. On the other hand, financial markets can drive the real economy. Therefore, transparency, disclosures, prudential norms and capitalisation are a must.