This incentive problem is often seen as one of the factors leading to the onset of the sub-prime crisis in the United States. [5] Pfandbriefe can therefore make an important contribution to ﬁnancial stability. On the other hand, it is also possible that, in extremis, the issuance of covered bonds can get out of hand.
Some observers have argued that a long period of low rates can create incentives among market participants (such as banks, insurance companies, and pension funds) to reach for yield by taking on higher levels of risk with adverse consequences for stability. These concerns should be taken very seriously, and a lot of work at the Fed is devoted to monitoring such risks.