The result was a hoarding of capital and liquidity, a sharp increase in risk premiums, and a generalized flight to liquidity and safety that only gathered momentum as instabilities in the economy and financial markets fed off each other. The characteristics of the networks and the instruments accentuated the uncertainty.
The Committee is also working on a countercyclical buffer framework to protect the banking sector from excessive credit growth. It will follow up with more detail on the design of this framework. What is clear from history is that the banking sector is most vulnerable during periods of excessive credit growth.