Third, the overall leverage of the sector is difficult to grasp. Alternative investment funds do not face any binding restrictions on leverage. A tail of highly leveraged bond and hedge funds with leverage multipliers exceeding 30 compares to an average leverage ratio for banks of below 20 in the euro area.
As the global crisis has shown, we must remain vigilant to possible new risks that might emerge in the financial system. We need to better understand the macroprudential dimension of risk in the investment fund sector. And we need to further enhance the sector’s resilience to systemwide shocks.