Banking and Finance

While it is generally assumed that financial regulations contribute to financial stability and safety, experience shows that they can also be a cause of instability. Sound financial regulatory policy should therefore seek, not merely to impose new regulations, but to discover and strip away those regulations that can be shown to do more harm than good. It should also favor regulations that encourage financial‐​industry innovation, including ones that allow nonbank financial technology (“fintech”) firms to compete on a level playing field with banks. Finally, to further encourage such innovation, policy should limit the government’s involvement in the direct provision of financial to those (rare) instances in which a clearly identified “market failure” prevents private‐​sector firms from doing the job with a reasonable degree of efficiency.