The International Swaps and Derivatives Association estimates that, at the beginning of 2005, cash accounted for nearly three-quarters of the collateral held to support derivatives exposures. BIS Review 32/2005  3  be creating concentrations of risk outside the banking system that could prove a threat to financial stability.
A particular concern has been that, as credit spreads widen appreciably at some point from the extraordinarily low levels that have prevailed in recent years, losses to nonbank risk-takers could force them to liquidate their positions in credit markets and thereby magnify and accelerate the widening of credit spreads.2 A definitive evaluation of these concerns about nonbank risk-takers would require information on the extent of credit risk transfer outside the banking system and on the identities and risk-management capabilities of the entities to which the risk has been transferred.