Also, the Audit Committee of the Board has a crucial role to play in ensuring that a sound internal control framework and audit system is in place within banks. The formation of a strong Audit Committee would help meet this objective.
Such chains tend to increase the web of interconnections in the financial system that, in some circumstances, can increase the likelihood or severity of systemic stress. For example, movements in collateral values can trigger margin calls and fire sales of assets, and thus activities that depend on market-valued collateral can be vulnerable.