ABSTRACT
The functional perspective means that Financial Services systems under conditions of rapid change, such as during the financial crisis, become intractable. The challenges associated with the institutional perspective, in a sense the challenges from making the assumption that Financial Services systems are tractable, are to define the precise attributes and to recognise all organisations that posses these attributes. In the case of Financial Services systems, the belief is that all Financial Services systems have the qualities defined by the institutional perspective, hence that there is something that we can contrast to the 'shadow banking system'. Robert Merton introduced the functional perspective as an alternative to the institutional view of Financial Services systems. The institutional perspective 'takes as given the existing institutional structure of financial intermediaries and views the objective of public policy as helping the institutions currently in place to survive and flourish'.
