adam smith 'invisible hand' Historically it has been favoured to allow markets to operate as freely, as poss ible (Rational

Market Theory) Regulatory objectives must be based on need base and not assumptions, to avoid c onflict, there should also be clear hegemony of objectives against one another Stigler and Kane questioned the regulations helping only the wealthy Then we had market default writers who argued for markets to be regulated just t o correct market distortions & excess The effect was to identify the Financial regulation may then justified on a collapse (stability), competition ( monopoly), conflict (information), consumer, or certainty basis. We may need regulations to prevent having an effect that can have an impact on the market because of their ability to have a domino (contagion) effect which raises externalities, causing additional loss es not borne by market players LLR or deposit protection can lead to moral hazard, so need for regulations to l imit this risk taking The regulations can be argued to prevent banks from acting collectively to deter ment of consumers need for a central regulation for efficencies bank calopse can have effect on individual depositers interconnection of markets can have an affect on the collapse in market to sprea d to others Natural monopolies information default consumer protection uncertainity/network effects