ERM Frameworks and Responses to risk [39]

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Bullet points include: Mutation of securitised credit model - massive growth, increased complexity, and risk retained on bank balance sheets Increased leverage and maturity transformation by banks and shadow banks Misplaced reliance on “liquidity through marketability” and apparently sophisticated maths Hard-wired pro-cyclicality, e.g. ratings triggers, margin calls and lack of counter-cyclical capital buffers UK specific: Banking sector relatively large compared to GDP Rapid growth of mortgage debt; rising property prices led to rapid and risky growth of mortgage banks

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