Globalization of finance and the challenge of national financial sector development

Against the background of the significant acceleration of the pace of financial globalization, this paper examines the features of the phenomenon and the challenges they pose for national financial sector development. Although financial globalization confers notable benefits, it also entails huge costs including financial crisis. The factors of weak banking system and poor regulation helped to exacerbate the financial crises of the 1990s. The paper, therefore, stresses the need for sound macroeconomic policies, orderly liberalization of capital accounts, adequate preparation of national financial systems and meeting other pre-conditions for countries to reap the benefits of financial globalization at minimum costs.