International Workshop on Financial System Architecture and Stability (IWFSAS) 2017 | 24 August 2017 | Canada, Montréal, United State

Financial system diversity may reflect diversity in markets (e.g. equity, bond, derivatives, money markets and others), or institutions (e.g. banks, insurance companies, non-bank financial institutions), or institutional forms (e.g. shareholders versus stakeholders value institutions). Such diversity may imply diversity in business models, different incentives, or different stages of development and the emergence of new forms of finance. Diversity can enhance the resilience of financial systems during shocks and periods of high uncertainty. However, diversity can also potentially lead to systemic instability. Diversity certainly leads to regulatory challenges and potential regulatory arbitrage. Further, the increasing interconnectedness within modern financial systems could result in the failure of one small part of a diverse financial system to disrupt the functioning of other more important parts of the system. There is no clear-cut evidence about the merits and risks of fostering diversity in financial systems. The topic of diversity seems also missing in the current debate on financial reforms to improve financial sector performance and resilience to possible shocks at the national, regional and global levels.

Professor Anjan V. Thakor, John E. Simon Professor of Finance, Olin Business School, Washington University in St Louis.

Hec Montreal

IRCCF Hec Monteral

Alphonse and Dorimene Desjardins International Institute for Cooperatives

Peter B. gustavson school of business