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Aftermaths of banking, sovereign, and other crises often look alike: after years of neglect and quasi-laissez-faire leading to a crisis, policymakers and scholars work assiduously on new schemes that will prevent the next crisis. While this constitutes a useful reaction, the process also reflects political immediacy as much as a long-term perspective. The title of the conference, “ Rethinking Macro Policy II: First Steps and Early Lessons, ” modestly but rightly reminds us of the limits of our knowledge in these areas. This chapter briefly discusses three kinds of reforms in the making in financial regulation: structural reforms (among which I would include governance and the interaction with shadow banking), solvency and liquidity regulation, and institutional/supervisory reforms. Before I begin, two preliminary remarks are in order. First, we need to step back a moment and think about why the banking sector is regulated in the first place, regardless of its degree of competition. There are multiple reasons for regulation. The most universal one is to protect depositors, or the deposit insurance fund and the taxpayer, if deposits are explicitly or implicitly covered. The state represents the interests of depositors, who do not have the expertise, the information, or the incentive to monitor the balance sheet and off-balance-sheet activities of their banks. This “ representation hypothesis ” explains why even tiny banks, without market power and systemically unimportant, are supervised, and why pension funds and insurance companies are subject to similar prudential requirements. 1 It also explains why investment banks, with no retail investors, have so far been left unregulated or lightly regulated. The representation hypothesis, however, does not account for the recent bailout of the investment banks and of AIG ’ s holding in the United The Contours of Banking and the Future of Its Regulation