In many ways, financial innovation has taken a backseat to financial stability concerns since the start of the financial crisis, as firms focused first on survival and then on complying with a blizzard of postcrisis regulations. However, banks have largely restored their financial condition and many of the major changes in regulations have moved into the implementation phase. Absent another shock to financial stability, the importance of financial innovation is likely to grow over the next several years. I look at two of the biggest drivers of past innovation in banking services, technology and regulation, to better understand likely trends in future innovation.
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