But let me be more specific and point to four broad areas of weakness in risk management which partly relate to the originate-and-distribute banking model and concern (i) the monitoring, assessment and management of credit risk; (ii) the management and pricing of funding liquidity risk ; (iii) the assessment of counterparty risk and (iv) the role of the so-called conduits and structured investment vehicles in such a model and in the transmission of tensions from the credit and structured finance product markets to the money markets.
Many of these weaknesses had been previously identified. But they combined in such a way that few had anticipated the potential severity of their joint impact on the core money markets. Several issues related to these risks and weaknesses require further examination, which is currently being undertaken by various fora, namely the Financial Stability Forum and the Basel Committee for Banking Supervision.