However, there were warning signs, even back in 2006, that global markets were “priced for perfection” and that even a small change in conditions could severely disrupt financial markets. 1 Several policy makers had indicated to market participants that they needed to prepare for a significant correction.
As chairman of the Global Economy Meetings of central bank governors, I myself reported my colleagues’ sentiments on this matter. At the same time, several financial stability reports – including from the ECB, the Bank for International Settlements (BIS), the Financial Stability Forum (FSF) and other organisations – analysed vulnerabilities and warned of emerging weaknesses.