ABSTRACT
The convergence of financial activities continues to drive a more interdependent and integrated system of financial markets. The competitive processes underlying the convergence of markets and institutional functions also are transforming the products themselves. Convergence also involves "securitization"—the trend to replace loans with securities instruments linking borrowers and investors in direct market transactions. Convergence also has led to much more competition in all forms of financing and financial activity. Disintermediation, the dispersion of financial activities beyond the traditional intermediaries, is one dynamic of convergence. Convergence involves both the blurring of institutional distinctions within the financial services industry and between financial and nonfinancial firms. The regulatory framework sought to promote the health of the whole financial market structure by keeping the distinct parts of the financial services industry separate. Regulatory barriers in financial markets have strongly influenced the strategies of firms in developing or changing their mix of financial activities.
