without undermining the safety and stability of the system? clearly, there can be a tension between the goals of fostering greater competition within the financial sector and of preserving safety and stability. to find a balance between the twin objectives of efficiency and safety has always been a challenge for governments when they examine proposals to change the regulatory framework for the financial system. i do not mean to make this sound like an impossible task. there are bound to be some changes that can help promote competition without adding substantial risk to the system. more generally, though, i believe that we need to examine ways that could ease the tension between efficiency and safety. for example, if we are to encourage the entry of new financial institutions as a means of promoting greater competition, perhaps we should also consider a more formal, explicit policy of ‘ early exit ’ when an institution runs into trouble. one possible approach would be that when institutions reach some minimum level of capital, they would be required to recapitalize themselves or find a merger partner within a short period of time. otherwise, and well before they became insolvent, they would be sold or wound up by the regulatory authorities. such an approach might help reduce risks to depositors, to the deposit insurance system, and to other creditors of financial institutions. this is not a new idea. the united states has already moved in that direction and so have we in canada, to a certain extent. but there may be room to move further down this path and, in so doing, to provide managers of financial institutions with stronger incentives to avoid getting into financial difficulties. to summarize, i agree with the mackay task force that encouraging new participants and reducing restrictions on existing players in the financial industry would benefit customers through improved service and lower costs. but this may have the potential to increase risks for the financial system. so we need to look at ways to avoid having these risks add to the costs of deposit insurance and to the in canada, under the payment clearing and settlement act, the bank of canada has been given formal oversight responsibility for ensuring that appropriate arrangements are in place to manage and control systemic risk in major clearing and settlement systems. costs for other users of financial services. one approach, as i mentioned, is to move further towards ‘ early exit ’ arrangements for troubled financial institutions. such arrangements might not be easy to implement. but if we could move in this direction, there might be more scope to benefit from enhanced competition without exposing users of financial services to unacceptable risks or

www. imf. org / - / media / files / publications / wp / 2020 / english / wpiea2020110 - print - pdf finckenstein, v. ( 2021 ). how international aid can do more harm than good : the case of lebanon. lse ideas strategic update www. lse. ac. uk / ideas / assets / documents / updates / lse - ideas - how - international - aid - can - do - more - harm - than - good. pdf seth, m. ( 2017 ). south korea's economic development, 1948 – 1996. oxford research encyclopedia of asian history https : / / doi. org / 10. 1093 / acrefore / 9780190277727. 013. 271 1 for example, seth ( 2017 ) reviews a slow post - war recovery in south korea despite an unprecedented foreign aid. while finckenstein ( 2021 ) discusses how foreign aid might have been harmful for lebanon. 7 / 7 bis - central bankers'speeches