Financial markets: implications for financial stability

As deputy governor of the Bank of England, the author provides an overview of the trends in consolidation of the market before assessing current proposals on the capital adequacy of banks and the new Basel Accord. He expresses concern about the perennial problem of liquidity and then provides some analysis of recent developments, particularly in alternative risk transfer mechanisms. He argues that innovations must be treated with some care and suggests that risk management in the financial system is the overarching goal.