The key drivers of the next financial crisis are likely to be higher liquidity reserves for banks and the lowering of capital requirements to be used as collateral , according to Satyajit Das of The Independent . Money will be withdrawn from markets following the use of devalued sovereign securities as collateral , forcing banks to purchase default protection , short government bonds or short sell currency , causing the value of such bonds to fall further and exacerbating losses . The devaluation will lead to increased demand for bonds due to increased default risk , resulting in reduced credit access which will reduce the supply of investment , employment , growth and credit in the real economy .
The key drivers of the next financial crisis are likely to be higher liquidity reserves for banks and the lowering of capital requirements to be used as collateral, according to Satyajit Das of The Independent. Liquidity will be drained from markets following the use of devalued sovereign securities as collateral, forcing banks to purchase default protection, short government bonds or short sell currency, causing the value of such bonds to fall further and exacerbating losses. The devaluation will lead to reduced demand for bonds due to increased default risk, resulting in reduced market access which will affect the supply of investment, employment, growth and credit in the real economy.