ABSTRACT
Constraints on activities for financial stability purposes may be complementary to actions on incentives. They relate to the nature of activities or production processes. In this chapter, for reasons of simplicity, a distinction is made between constraints imposed on institutions, practices in financial markets as well as on the organization of financial infrastructure. The criteria that define financial institutions, particularly banks, often correspond to constraints: the obligation to participate in a deposit insurance scheme and the regulatory constraints on the scope of financial activities. The debates on the scope of banking activities and the structure of institutions are reflected in the regulations, which are marked by strong constraints inherited from the 1930s. These constraints were gradually lifted, leading to a largely deregulated system at the start of the Great Financial Crisis. During the nineteenth century, the development of modern financial activities took place in a context where most industrialized countries imposed strict but often incomplete regulations on financial institutions.
