Important reasons for this effect include disparate supervisory and bankruptcy policies and procedures both within and across national borders, complex corporate structures and risk management practices that cut across different legal entities within the same organisation, and the increased importance of market-sensitive activities such as OTC derivatives and foreign exchange transactions. In addition, the larger firms that result, in part, from consolidation have a tendency either to participate in or to otherwise rely more heavily on ''market'' instruments. Because market prices can sometimes change quite rapidly, the potential speed of such a firm’s financial decline has risen. This increased speed, combined with the greater complexity of firms caused in substantial degree by consolidation, could make timely detection of the nature of a financial problem more difficult, and could complicate distinguishing a liquidity problem from a solvency problem at individual institutions.
 
The importance of this concern is illustrated by the fact that probably the most complex large banking organisation wound down in the United States was the Bank of New England Corp. Its USD 23.0 billion in total assets (USD 27.6 billion in 1999 dollars) in January 1991 when it was taken over by the government pale in comparison to the total assets of the largest contemporary US firms, which can be on the order of USD 700 billion.''
 
The systemic risk relates not just to the financial sector itself. It also stems from the possible impact this would have on weaker participants in the international financial system, such as the developing countries. Along with the globalization of finance, financial crises in individual countries and economic regions have become the norm. And globalization has also meant that the effects of a crisis in one part of the world are quickly transmitted elsewhere, making contagion a word as often referred to in financial as in medical parlance. The number of instances of crises of significant dimensions has been growing. To quote one set of observers, among the major crises that have accompanied the rise of finance have been: ''the crisis in the Southern Cone in the late 1970s; the Third World debt crisis of the early 1980s; the savings and loan debacle in the US in the late 1980s; the so-call ERM crisis in 1992; the Mexican crisis of 1994-95 and its follow-on crisis in Latin America; the East Asian crisis of 1997; the Russian meltdown of 1998; and the collapse of the real in Brazil and its impact on the rest of Latin America.'' Besides these there have been crises in individual countries in the 1990s such as in India, Argentina and Turkey. Of these instances, in all cases where the crisis affected developing countries, the impact on the real economy as well the large proportion of people in those countries living at the margins of subsistence has been devastating. One only needs to refer here to the ''lost decade'' of the 1980s in Latin America and the evidence on unemployment, poverty and deteriorating quality-of-life indicators in Sputheast Asia.
 
These and other instances suggest that the dominance of finance has substantially increased systemic risk in the international financial system, with extremely adverse implication for the progress of the real economy. Yet little is being done to prevent the autonomous transformation of the system in directions that enhance such risk. What is more, the influence of the finance capital is so great that despite the weight of the evidence collated by the G-10 report, it chooses to argue against intervention in the financial sector. In its view: ''The complexity and different effects of the consolidation processes taking place within the payment and settlement industry make it impossible to categorise consolidation either as purely positive or as purely negative from a social welfare viewpoint… In general, at the present stage, it does not seem to be advisable for public authorities to interfere with the market competition between financial institutions or between payment and settlement systems. In fact, public authorities, as a public policy objective, may wish to remove potential obstacles to the consolidation process when it enables the market to develop initiatives aimed at reducing risks and enhancing efficiency in the field of payment and securities settlement.'' Clearly evidence, theory and logic are no more the determinants of public policy.