This chapter examines regulatory reform and innovation in the financial markets of the advanced industrial states. Robert Pringle refers to the terms of the economic and political relationship between financial institutions and the state as the "bankers' bargain". The Bretton Woods period provides the financial markets and national governments to an internationally agreed set of rules and institutions. Financial market regulatory reform is, then, a response to the inadequacy of such nationally-based regulatory systems to deal with the new internationalization of finance. In the recent history of financial markets, the pattern has been one of "desegmentation", in order to allow national financial institutions, faced with loss of competitiveness, to resist, and this has required both deregulation and new regulation to deal with the changed policy environment. Macroeconomic conditions in the 1980s—notably, the development of American macroeconomic policy in 1980-84, during the first Reagan Administration—might have been designed to stimulate the expansion of cross-border finance.