Indeed, conducting adequate due diligence regarding the nature of underlying investment exposures cannot be replaced by decision-making based almost exclusively on ratings. BIS Review 122/2007  3  •  Second, market participants were not sufficiently alert to the possibility that liquidity could dry up in structured finance markets, even though secondary market liquidity in the various structured finance markets has been traditionally thin.
As you know, there are several reasons for this, inter alia: the specificity of these instruments, which are often tailor-made; the “buy-and-hold” strategies followed by a large number of investors (including, pension funds, insurers, and banks); and the limited comparability of mark-to-model valuations, stemming from the complexity of these instruments.