BIS chief warns soaring debt could complicate crisis response
Summary
On October 5, Pablo Hernández de Cos, the Chief of the Bank for International Settlements (BIS), warned that soaring public debt and significant market changes could complicate future crisis responses by central banks. He highlighted that many economies are grappling with public debt levels near post-World War Two highs, making it challenging to discern between genuine market dysfunction—and the need for intervention—and investor concerns surrounding government finances. Hernández de Cos also noted the growing influence of non-bank financial institutions, which, while they support market liquidity in stable times, can exacerbate stress during crises due to their leverage and funding mechanisms. He emphasized the importance of stronger regulation of these entities and emerging financial technologies to enhance the effectiveness of crisis management strategies employed by central banks.