"The new financial landscape is generating many benefits. It is a fact of life in a market environment that these benefits can only be obtained by undertaking risky activities and projects," the OECD said. But "a fundamental and constant challenge for policymakers is to assess what the 'normal' risks ... are in an evolving fainancial environment. "There are no easy answers," the report said, and the inability of policy makers and market participants to evaluate risks in a fast-developing market "creates a fundamental uncertainty in the financial system." The only protection is to follow the common-sense rule "the higher (the) uncertainty, the lower (the) leverage," in the form of less debt and more equity to provide "a larger buffer against adverse circumstances and stresses in the financial system".

The OECD report highlighted the problem of regulating an increasingly globalised Financial services sector in the wake of a wave of merger and acquisition activity which has accelerated in Europe with the birth of the euro last year. "Concerns could grow about the possibility for a limited number of very large players to have considerable power to restrict competition," the report said. The US banking market has already undergone widespread consolidation, and that of South Korea and Japan is also underway, albeit driven by the need to recapitalise a failing system rather than boost profits. The EU market is likely to follow suit with the introduction of the euro, but while cross-border wholesale banking has proven its ability to increase efficiency in new products, the jury is still out on the advantages for retail and "traditional" banking services, the report said.