That is the risk that several firms are holding the same positions, and all of those firms are basing their value-at-risk estimate on the assumption that these positions could be liquidated more quickly than they actually could. This circumstance is also known as a “crowded trade.” Examples  BIS Review 85/2001  3  include the fixed-income relative-value arbitrage in autumn 1998.
Banks have already anticipated some future credit losses by increasing their provisions. This is in response to a doubling in the value of loans where credit risk has significantly increased since origination, also known as Stage 2 assets. And despite these efforts, loan loss provisions of euro area banks, could still be below needs suggested by fundamentals.