With the establishment of the European Monetary Union, the formation of the new republics following the break-up of the Soviet Union, and the democratization process in Latin America, new laws were passed for many central banks, and in all cases the emphasis was on their independence.
Would you get into a taxi if you knew the driver was not bound by traffic rules? Would you do business with a bank that was not regulated? Banks with a low level of capital and inadequate internal controls are viewed with suspicion: investors ask for higher risk premia and the banks thus face higher funding costs.