During the last fifteen to twenty years, a variety of forces have had an impact on the structure, profitability and stability of the banking industry in the industrial countries. New technologies, financial innovations and liberalisation of national as well as international markets have changed the environment in which banks operate and have also had implications for the conduct of monetary policy and the fundamental stability of the financial sector. Banks have had to adjust to increased competition from other financial institutions as well as to changes in the regulatory environment and, in some cases, these changes have contributed to serious financial instability. In many countries, banks have responded by looking for economies of scale and scope, through consolidation and a widening of the range of product and services offered. At the same time, the rise in concentration and the blurring of distinctions between bank and non-bank financial intermediaries has raised further questions regarding system stability and the lender of last resort function of central banks.
Against this background and with a view to exploring macro as well as microeconomic implications, the topic of the Central Bank Economists' Meeting held at the BIS on 29th and 30th October 1998 was chosen to be: "The monetary and regulatory implications of changes in the banking industry". The papers submitted by the participating central bank economists were presented and discussed in four sessions covering the driving forces and key manifestations of changes in the intermediation process; the implications for the transmission of monetary policy changes; the implications for financial stability and payments systems; and policy implications.