For three decades, major economies have undergone a process of financial deepening, whereby people and firms were able to borrow more readily and efficiently to finance investments and to smooth consumption over time. People also took increasing control of their retirement planning and became steadily more active in financial markets.
With these changes, the importance of financial markets relative to banks – and of the financial sector relative to other sectors of the economy – increased. During this process, the level of household debt relative to GDP rose sharply. These trends were at their most extreme in the United Kingdom and the United States.