Sarah Breeden warned that while the global financial system has shown resilience in the face of recent shocks, underlying vulnerabilities remain. She noted that “large, correlated shocks can arrive with little warning,” emphasizing that current stability reflects structural improvements since the global financial crisis, particularly within the banking sector.
However, Breeden cautioned that risks have not disappeared but rather shifted across the financial system. She pointed to “familiar echoes of leverage, complexity, concentration and opacity” emerging in areas such as private markets, government bonds, and stretched asset valuations. If these vulnerabilities were to crystallize simultaneously, she warned, “we may be in for a rocky ride.”
Despite these concerns, Breeden stressed that the system is better equipped to manage stress than in the past. With a more resilient banking sector and enhanced system-wide surveillance, policymakers now have more targeted tools to respond. Still, she underscored a key lesson from history: the most dangerous moments are not when risks are obvious, but “when they are too easily dismissed”—highlighting the importance of vigilance even in periods of apparent stability.
