As I mentioned earlier, during times of systemwide stress, liquidity shocks can become correlated so that the same factors that led to liquidity problems for the SIVs could also lead to high liquidity demands in other parts of the financial market, and might also put pressure on banks' own liquidity.
It is likely, however, that the slowdown of the global economy will also curb this contribution in the period ahead, while declining domestic demand will continue to depress corporate profits. A further source of risks to financial stability has been the continued worsening of the average hedge fund investment performance amid prolonged and heightened financial market volatility.