A key lesson of the crisis is that systemic risks lie not only in less mature markets but in advanced countries as well. The clear lines of distinction between the surveillance and lending functions have to be maintained to ensure that the Fund’s more intense surveillance focuses not only on borrowers and potential borrowers but also on the creditor members. Surveillance 7.
Risks can be mitigated via hedging strategies or a larger share of variable rate loans. But hedging contracts do not offer perfect protection as they may be subject to counterparty risks. Even variable rate loans can give rise to vulnerabilities as interest rate risk may be converted into credit risk. So far, however, credit risks have not increased.