The direct effect of this unprecedented monetary easing has been to lower whole yield curves to extraordinarily low levels, and that process is continuing. The most pronounced effects can be seen in Europe. If one were to invest in German government debt for any duration short of nine years, one would be paying the German government to take one’s money.
The disaggregated exposures of the regulated clusters at any point of time to the unregulated entities were not available and as the markets collapsed, such exposures became evident. Another critical aspect which was again brought forth during this crisis was the market behaviour and impact of entities, some of them unregulated, having huge trading books and dynamically hedging their huge portfolios.