"Agency costs arise where an agent pursues their own self-interest rather than those of the principal (or owner) because of information asymmetry or other incapacity on the part of the owner to ensure the alignment of the agent's interests with his or her own interests," David Gruen, executive director of the macroeconomic group at Treasury, said yesterday."Agency costs can occur throughout the economy but are particularly pronounced in the financial system. These concerns are often raised in relation to the provision of financial advice," Gruen told delegates at the CEDA State of the Nation 2014 forum."The relationship between stability and competition is not necessarily a straightforward one," he said."It is rarely possible to trade-off a given amount of competition for a given amount of stability. The impact of changes in competition on stability will vary on a case by case basis. "In some cases, increases in competition can boost stability, while in others, competition can harm stability."For instance, competition can improve stability by removing less efficient financial institutions from the market, making the overall system more resilient. "Alternatively, competition that results in declining lending standards may store up future problems by increasing the likelihood of defaults."