[…] In other words, the banks were creating a parallel, off-balance-sheet banking system that would take short-term resources and invest them in long-term risky assets that were neither regulated nor subject to supervision. The managers of many of these special vehicles were buying the same structured products based on subprime mortgages.
We should keep in mind that the search for yield driven by low interest rates could cause a concentration of funds in the real estate market or risky assets, amplifying financial imbalances. The possibility of increased household and corporate credit risks and their effects on financial institution soundness should also be closely monitored.