Third, although so far the hedge fund sector was relatively unaffected by the recent market turmoil, some uncertainties remain regarding hedge funds’ exposures to credit markets, as well as their leverage and liquidity risk. Finally, outside the euro area, persistently wide global imbalances continue to pose a risk that they will be unwound in a disorderly manner.
This could bring about further tensions in global capital markets and, if this risk were to materialise, it could pose a challenging test for the risk management and loss-absorption capacities of key financial institutions. All in all, the risks to euro area financial system stability have materially increased over the past 6 months.