Second, securitisation exacerbated the information asymmetries that are inherent in credit markets. In particular, there is uncertainty about the distribution of credit risk among global market participants and, consequently, transparency about exposures is limited. Third, some market participants’ risk management standards have not kept pace with developments.
This cocktail of vulnerabilities may explain the surprising speed with which mistrust among market participants spread around the world, causing several financial market segments to dry up temporarily. However, there is more to the present financial market turmoil than meets the eye of the casual observer.