BIS chief warns soaring debt, market changes could complicate future crisis response
TLT•Bank for International Settlements chief Pablo Hernández de Cos warned that high public debt, the growing role of non-bank financial institutions and new technologies could make future financial crises harder for central banks to manage.
1. Changing crisis backdrop
Hernández de Cos said central banks would remain central to managing future crises, but high public debt and persistent fiscal pressures could make interventions more difficult and controversial. He warned that central banks may struggle to distinguish market dysfunction requiring action from legitimate investor concerns about government finances.
2. Risks and response tools
He cited the March 2020 dash for cash in US Treasury markets and Britain’s 2022 gilt crisis as examples of how non-bank institutions’ leverage and market-based funding can amplify stress. He said the Bank of England’s response offered a blueprint, while warning that a commitment to asset purchases might not be credible in a larger, more persistent crisis.
3. Technology and cooperation
Hernández de Cos said online banking, social media, stablecoins and AI could accelerate future crises, and called for stronger regulation of non-banks and emerging financial technologies. He also said regulators, governments and global cooperation have important roles, with central bank swap lines remaining critical during acute distress.
