Counterparties are expected to impose limits on their exposure to a hedge fund that takes on excessive leverage, is engaged in excessively risky strategies, or is not sufficiently forthcoming with information about their risk exposures. This indirect approach has generally worked well in containing the financial stability risks posed by hedge funds.
Because of a recovery in the service and construction sectors, the employment situation improved slightly, which had a salutary effect on expectations and demand in the household and corporate sectors. The growth in domestic demand helped to constrain the general government deficit, i.e. the combined deficit of central and local governments and social security funds.