BIS Review 57/2010  7  sale can be ignited as each bank attempts to guard against further reductions in value, but no bank is on the other side of the market. Such considerations are magnified in the context of the uncertainties and innovations that characterise the build-up to financial crisis.
In such a situation, individual institutions and regulators may not be fully aware of all interconnections and correlations associated with new financial instruments and business models. The risk of systemic instability, and its potential costs for the economy, has long been recognised in both the academic literature and in policy circles.