Why finance inevitably becomes larger and riskier

Finance (financial intermediation) transforms savings into loans for the economy to invest . Globally, however, savers, whose cumulative savings are grow ing , increasingly seek safety for their investments (they want to invest their savings in government bonds, bank deposits, etc.). At the same time, a high level of investment projects requires finance and the se investments are risky (investments in new technologies, the effects of financial cris e s, etc.). Finance (financial intermediaries) must therefore transform ever-larger risk-free savings into risky loans for investment. Spontaneously, financial intermediation therefore becomes larger and riskier, since financial intermediaries have ever-larger risk-free savings in their liabilities and ever-larger risky investments in the ir assets. The art of regulating financial intermediaries therefore consists in limiting this risk and its effects on the solvency of financial intermediaries without jeopardising the financing of risky projects in the economy. But it is fanciful to think that financial intermediation could become small and risk-free.