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Third, the atomisation of risk has been accompanied by higher leverage embedded in the instruments themselves, making it hard to assess which of these countervailing effects prevails. While atomisation of risk mitigates the impact of a shock, leverage amplifies it. For instance, “singletranche” collateralised debt obligations (CDOs) substantially increase “embedded” leverage: a singletranche CDO is generally leveraged 5 to 10 times, meaning that potential losses are 5 to 10 times greater than the losses on the underlying portfolio. This is a type of leverage that does not show up in lending figures. Assessing the extent and effect of embedded leverage on a system-wide basis is therefore a real challenge. Lastly, market liquidity can be very fragile. Indeed, it is now much easier to trade credit exposures thanks to standardised credit derivative indexes. However, liquidity remains very uneven among CRT markets and cannot be guaranteed under stressful market conditions. Many institutions are also vulnerable to “runs”. Market liquidity dry-ups therefore constitute one of the risks to be assessed. 3. What are the implications for central bankers and supervisors? I would like to suggest three approaches: First, remind market participants and investors that benign times, such as the current credit environment, should not be the benchmark for assessing risks. Credit risk transfer markets remain untested in stress situations. The US subprime mortgage market is a bellwether reminding us that excesses in credit growth and relaxation of lending standards are paid for sooner or later by much higher risk premia.