Abstract. The economic crisis that began in 2008 raised the problem of bringing into discussion some very important economic issues, including financial instability, which is perhaps the most serious and important one. Thus, given that economic policies seek not only to solve and to present alternatives, but also to be a part of a broader vision that includes longer temporal considerations, the financial instability approach also involves ideological reviews, policy reviews and so on. Thus, the central idea of this paper is that there is liberalization versus regulation dilemma, especially in the banking sector. The paper aims to analyze the effects of the benefits and costs of both options on financial stability, taking into account the link between the financial economy and the real economy. The paper also offers some solutions and future prospects.

Keywords: financial stability, financial liberalization, financial regulation, banking sector, economic policies.