Even so, nonbank firms and activities can pose the same key vulnerabilities as banks, including high leverage, excessive maturity transformation, and complexity, all of which can lead to financial instability. The reforms undertaken to date reflect both the differences and similarities between the nonbank and bank sectors.
While there has been progress on the financial reform front, we should not be complacent about the stability of the financial system. Regulation often creates incentives for activity to move outside the regulatory perimeter, and market participants respond to incentives. Thus we should expect that further reforms will certainly be needed down the road.