Stability And Competition

Financial Stability (Financial Stability)
With financial stability is a situation where the finance company and the market can efficiently mobilize savings, provide liquidity and allocate investment without interference. Potentially subject to financial stability occurs when the periodic failure of financial institutions. Failure is only a periodic attention when terganggunya cause the banking system.

Monetary Stability
Monetary stability is the stability of currency values (ie low and stable inflation). Monetary stability, financial stability, with different. Although the same can happen, they do not always become a 'fellow travelers'.

Financial Liberalization
The main reasons why monetary policy that does not always result in successful financial stability is the 'wave' liberalization of the financial market in the year 1970 and the 1980s. Role in managing the country's economy was reduced through the following actions:
With rules gone that inhibit competition among financial institutions, including the liberalization bank operational requirements permit, which is the major part of the regulation until the 1970s
With absence limit-limit financial transactions such as the maximum interest rate of loans and deposits
With absence international capital movement restrictions at the same time with the introduction of currency exchange

Competition and banking
Liberalization of financial market pressure to increase competition among banks with:
Forcing banks to reduce the margin business - a bank must be the product more competitive (in price)
Creating a large number of newcomers, so that increased competition

Difficulty in obtaining the same in this situation means that many institutions are forced to increase the risk of the acquisition be to maintain revenue.

Innovation of financial products
Liberalization of the financial sector also cause a period in which innovations occur rapidly, especially the growth of products such as futures, options and Swaps (derivatives market) and sekuritisasi assets. These products increase the ability of banks to move the risk among banks and investors and to the other.