After all, the interplay between falling oil prices, an appreciating currency and a very faltering recovery in demand in many parts of the euro area masks the risk of a phase of very low inflation lasting too long. This can lead to market participants adjusting their inflation expectations.
However, in their role as providers of such funds to entities involved in leverage, banks expose themselves to significant credit risks, since any wrong decision by the leveraged participant results in a loss not only to him but also in potential loss to the lending bank.