Study on relations between financial innovation and financial regulation

Since 1980s, the financial industry has been driven to huge prosperity and rapid development by financial innovation. And financial innovation has been promoting the entire financial operation system adjustment and evolution. However, innovation is a double-edged sword. Its negative influence puts the entire financial industry and the national economy at huge financial risk. Based on the analysis of the positive and negative effects that are produced by financial innovation, this paper puts forward the dynamic balance mechanism between financial innovation and financial regulation, to prevent excessive or insufficient financial innovation caused by insufficient or excessive financial regulation.