It has been suggested that financial innovation is central to economic growth and prosperity and that consequently financial system regulators should resist over-regulation that might thwart innovation. On the other hand certain financial innovations have been blamed for taking us to the brink of disaster in recent times. The global financial crisis has required extraordinary measures by governments to avert and continues to impose costs on real economic performance around the globe. Should the potential benefits of financial system innovation deter regulators from imposing restrictions on the activities of financial institutions?
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