As economists like to put it, there are external factors at play. If the financial system is thrown off balance, this also has a negative impact on those outside it – businesses in the real economy or taxpayers, to name two examples. That is why it is necessary to regulate the financial system in order to safeguard its stability.
The need for regulation is beyond dispute: the question is not whether, but how we should regulate. Of course, there are a number of different ways to approach the issue, but one thing is clear: regulation isn’t stationary. The financial system is in constant flux, and regulation has to keep pace with it.