However, dependence on capital markets and on sustained market liquidity also increased, as banks and other intermediaries placed greater reliance on their ability to “originate and distribute” loans and other financial products. They also depended on the market to manage their risk positions dynamically.
The coincidence of greater levels of deregulation and integration of capital markets implied that if a major problem arose it was more likely to spread quickly across borders. This environment encouraged an increase in risk-taking as many players “hunted for yield. Interestingly, the composition of investors also changed.