Sustainable Financial Systems

Abstract

The financial system is crucial to the functioning of any economy. Without it, efficient resource allocation could not take place and goods and services could not be distributed. An advanced economy requires a sophisticated financial system of markets and institutions. The financial systems—banking, insurance and stock markets—have been and continue to be in a period of transition. In recent decades dramatic and far-reaching changes took place in the world of finances, for example in the regulatory environment. A key objective in the financial sector and in the financial system will be sustainability, stability and safety. The purpose of this chapter is to present some theoretical topics and other important aspects of contemporary financial systems. The additional aim of the study is to outline the relations between regulation, deregulation and reregulation of the financial sector. Recently, the structure of the finance industry has changed fundamentally. The events of recent years have proven that risk-taking in finance can bring significant costs for the economy. A safer and more sustainable financial system would mean restricted lending services and prove a stumbling block to economic growth. The study proves that a change in the finance sector regulation paradigm is necessary. In the years to come, the development of finance sectors will depend on curtailing political uncertainty, improving cooperation between regulators and financial intermediators, and introducing more efficient regulations. It is of utmost importance for the economic future of businesses.