FINANCIAL STABILITY AND DEVELOPMENT OF CAPITAL MARKETS

George Horia Ionescu () and Ruxandra Vilag
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George Horia Ionescu: Romanian American University

Romanian Economic Business Review, 2013, vol. 8, issue 3.1, 46-55

Abstract: Liquidity crisis emerged in the U.S. market had a significant impact on the European financial markets. To restore confidence in the financial system, authorities took measures to reduce systemic risk and limit the impact on the economy. These measures were aimed at monetary stimulus,fiscal, liquidity injections by Central Banks and direct action to support systemically important institutions. Also, the Basel Committee adopted in September 2010 new standard relating to capital and liquidity requirements will require financial institutions from 1 January 2013, as Basel III. Financial integration in Europe is of particular importance since both economic theory and empirical results show that integration and financial development contributes to economic growth by eliminating barriers to the transfer of capital between countries in a more efficient allocation of it. These benefits to financial stability complement the critical role that capital markets play in efficient resource allocation and in reducing over-reliance on the banking sector for the mobilization of savings and financial intermediation. Regulators are often faced with the perennial question of whether and how they should intervene to manage irrational exuberance and panic in the market.

Keywords: financial stability; capital market; financial integration; financial crisis (search for similar items in EconPapers)
Date: 2013
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