4  BIS central bankers’ speeches  As it turned out, the ultimate investors did not fully understand the quality of the assets they were financing. Investors were lulled by triple-A credit ratings and by expected support from sponsoring institutions – support that was, in fact, discretionary and not always provided.
When investors lost confidence in the quality of the assets or in the institutions expected to provide support, they ran. Their flight created serious funding pressures throughout the financial system, threatened the solvency of many firms, and inflicted serious damage on the broader economy. Securities broker-dealers play a central role in many aspects of shadow banking as facilitators of market-based intermediation.