State-of-the-art risk management systems, however, have not yet been tested in adverse market developments. We must beware both overconfidence and outright complacency. 3.2  Unregulated financial business  Over the past couple of years, financial intermediation that is not subject to prudential regulation and reporting has experienced rapid growth.
In an environment of low interest rates and abundant liquidity the inevitable search for yield has tempted many investors to take on more risk than they used to. Large amounts of money were channelled into risky and scarcely regulated asset classes. Hedge funds and private equity recorded sizeable inflows. The growth of the hedge fund industry has drawn particular attention and controversy.