ABSTRACT
This chapter will deal with prospects for financial stability in the light of recent developments in international banking and financial systems. The speed of change and innovation in financial markets presents a real challenge for banks and for authorities responsible for financial stability. Consolidation has certainly changed the financial landscape in the last decade. Mergers and acquisitions accelerated during the 1990s, and the global integration of capital markets proceeded apace. In the previous chapter, Roger Ferguson sets out some of the policy issues raised by this trend towards consolidation, and there is little I would want to add. I consider below, first of all, consolidation from a UK perspective. I then turn to banks' capital adequacy and the new Basle Accord. Thirdly, I would like to address the related subject of liquidity. Finally, consideration is given to the implications of some recent capital market developments - in particular, alternative risk transfer mechanisms - for risk management in the financial system.
