ABSTRACT
This chapter examines the forces which stimulate financial system change and shows how they can be used to improve system performance. System change occurs as financiers search, in response to changing economic conditions and to changing knowledge, for new ways of increasing profits. To a lesser extent, system change also occurs as a response to regulatory change. Whatever its current form and nature of change, a financial system is unlikely to be free of performance problems and changes in regulation are usually intended to ameliorate such problems. Designing remedial regulation is best approached by recognising and taking advantage, as far as possible, of the forces which drive system change.
