Bid-ask spreads widen considerably and the depth of book deteriorates. That has always been the case. BIS central bankers’ speeches  3  However, in addition to a decline in liquidity provision, banks now have less risk-warehousing capacity than they did in the past. They are less able to be nimble buyers of assets whose prices they believe have overshot.
In the past, while the banks may have pulled back for a while as prices fell, they were generally among the first to step in and buy when they felt that the price had overshot. This is one important aspect of what I mean by warehousing or absorbing risk.