Triggers of August market ‘flare-up’ still in place, BIS warns
Leveraged positions remain at risk of sudden unwinding, as margin calls play amplifying role
A postmortem of the August 5 market shock by economists at the Bank for International Settlements (BIS) finds that many triggers of the “flare up” still pose threats to stability.
The analysis highlights how risk-taking worldwide is still high and says some of the positions unwound during the shock were quickly rebuilt. It also underscores how leverage and margin calls continue to act as amplifiers of shocks, given the wide and growing use of market-based finance.
The authors – Matteo Aquilina
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