•  Second, and more fundamentally, the recent financial turmoil indicates that we need a better understanding of the “originate and distribute” model of financial intermediation and its implications for monetary policy transmission. This model allows greater risk diversification and helps ease credit constraints in normal times.
However, it may also induce agents to take on more debt and greater exposure – direct or indirect – to highly complex financial instruments. Furthermore, there is a lack of market-determined prices for certain structured finance products, and the evaluation models used by rating agencies have shown limited reliability in taking into account tail risk.