In the course of such risk transfer and due to uncertainty as to their future income, households will tend to increase their savings rate, at least during a transition phase. As to financial stability, the jury is still out on whether large- scale risk reallocation has rendered financial systems more stable.
Initial evidence seems to point in this direction because financial institutions on the whole proved quite resilient during the market downturn and recession following the new economy boom. Instabilities typically arise when financial intermediaries run into trouble - irrespective of who the ultimate bearers of risks are. Financial intermediaries’ risk management techniques are deemed to have been greatly refined and improved.