In this study, we have considered a basic model of financial intermediation, the static and dynamic efficiency and stability attributes that define its value in the context of economic development and the national interest, and the implications for the financial firm in terms of strategic positioning and performance. We have also considered the relationships that appear to exist between the banking and financial structure and the process of corporate governance and control, including their implications for economic performance. And we have considered some of the difficult issues and tradeoffs facing regulators as they strive to maximize the efficiency, competitiveness and stability of the national financial systems in a global environment where not only financial firms compete with one another, but regulators do so as well.

Prospective developments in global financial markets carry serious implications for both national financial systems and for the various strategic groups of firms competing for business, and much reshuffling of clients and suppliers can be expected as traditional relationships are gradually eroded by pressure for access to creative financing structures, capable and efficient execution, and performance orientation. Over time, firms and national financial systems capable of offering integrated financial services of various types and with substantial execution and trading capabilities will emerge among the market leaders.

Countries should certainly make it a primary goal to evolve towards a financial system that optimizes static efficiency, dynamic efficiency and stability via vigorous competition across and between channels of financial intermediation and the firms operating in those channels. They should also provide national treatment of foreign-based financial institutions, which often are the source of intense competition and financial innovations transferred from abroad. Countries should work to minimize functional and geographic barriers to activities in all types of financial and allied non-financial businesses, including elimination of barriers between banking and insurance. And the regulatory environment should be as competitive as possible—within the bounds of reasonable prudence—with the major financial centres abroad in order to retain as much domestic financial value-added as possible and maximize the prospects of providing them for others as well.