Indeed, the supply of swaps is very ample and practically only constrained by the amount of credit risk which can be taken by market participants when entering into these contracts. Government bonds, by contrast, are in more limited supply.
close relationships between banks and the supervisor led at instances to slow reactions or unwillingness to react at all to noticed problems in banks. Third, a suspicion of political influences in supervision has weakened the standing and credibility of supervisors. Moreover, in 2010 it became desperately evident that the bank and sovereign risks are tightly interconnected and with two-way causality.