Discussion: Implications of Recent Banking Developments for Financial Stability

Abstract

The business of banking has changed profoundly over the past 15 years, and some of these changes have come to entail serious problems during periods of severe stress in financial markets. In part, banking changes have contributed to financial instability (actual and potential), and in part banking instability has reflected economic pressures. Recognizing the complexity of these influences, the need to anticipate problems–to keep “good” banks from going “bad,” as well as to keep “bad” banks from failing–is particularly urgent, especially since the economic environment in the years just ahead appears likely to be at least as unsettled as that of the recent past.