The paper by Mr Thompson is a comprehensive, concise and tightly argued discussion of prudential regulation in Australia. I would like to put the paper in a broader context, highlighting the key features of the world-wide transformation of the financial industry and the basic dilemmas facing the authorities in charge of safeguarding financial stability. 1 The Background Just as the years spanning the late eighteenth and early nineteenth centuries have gone down in history as those of the Industrial Revolution, so the last decades of the twentieth century and beyond may well be identified in retrospect with a Financial Revolution. 2 Some twenty years ago a unique configuration of economic, political and technological forces began to take shape. Their subsequent operation would transform the financial industry. Whether the verdict of history will be as positive in the case of the recent revolution as in that of its predecessor is a moot question. That verdict will depend on the ability of the authorities and market participants jointly to harness the forces of change
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