For example, we all understand that new drugs should be tested before they are put on the market and that new models of aircrafts and automobiles should be regulated for safety standards. The case for financial regulation rests on the same logic although it is not as well appreciated. 6.
Even as the logic for regulation is quite robust, the frequent criticism against it is that inappropriate or injudicious regulation would stifle innovation. The challenge for regulators  BIS central bankers’ speeches  1  therefore is to protect public interest while at the same time ensuring that innovation that will potentially add value is not stifled.