These episodes were apt to be costly for those directly affected and reminded investors that investments pose risks, and that prudence requires that these risks be understood and managed. Overall, however, because these episodes were well contained and of short duration, they may have left investors too complacent, and therefore contributed to postponing an overdue repricing of risk.
Indeed, central banks, including the Bank of Canada, had for some time identified the possibility of "a significant price reversal in riskier assets." 6 Let me now describe how the late summer turbulence in financial markets affected various forms of liquidity. 6  4  This phrase is taken from the Bank of Canada's December 2005 Financial System Review, p 4.