to this stacking of leverage may be exacerbated by interconnections within intermediation chains. those could include overlapping management of private credit and private equity, private credit being provided to businesses sponsored by private equity, and unobserved provision of leverage to private credit funds by other financial intermediaries. moreover, few private credit providers have experienced a complete credit cycle, which makes it difficult to predict how the industry might respond to a negative shock. i will now move to a discussion of stablecoins, which are digital assets that seek to maintain a stable value relative to a reference asset such as a national currency. they may also be accepted in different parts of the payment system. with assets under management of around $ 170 billion, stablecoins have a relatively small footprint in the u. s. 5 they are not widely used as a cash - management vehicle or for transactions for real economic activity but are generally used for digital asset investments. stablecoins lack a comprehensive federal regulatory framework, and many u. s. dollar - denominated see figure 4. 5 in board of governors of the federal reserve system ( 2024 ), financial stability report ( washington : board of governors, november ), p. 41, https : / / www. federalreserve. gov / publications / files / financial - stability - report - 20241122. pdf. - 10 stablecoins operate abroad. stablecoins could scale quickly, particularly if the stablecoin is supported by access to an existing customer base. the fact that stablecoins are pegged to a reference asset makes them structurally vulnerable to runs. if a run on a large stablecoin were to occur, liquidation of the assets backing the stablecoin could be disruptive, especially if those assets were linked to other funding markets, like commercial paper or certificates of deposit. some stablecoins have restrictions on redemptions, which can help reduce vulnerabilities, assuming that investors alter their expectations to reflect such restrictions. questions have emerged about the role of stablecoins in intermediation chains, including the use of leverage by stablecoin investors and the use of stablecoins to obtain leverage — for example, by serving as loan collateral. i will continue to monitor developments in these areas. now, i would like to move to cyberattacks and similar events — such as hardware or software failures — which are becoming more common. the number of cyberattacks on financial

the risk of erosion of asset quality. the report included a detailed analysis of the quality of the banks ’ loan portfolios. although the conclusion was that the banks were well prepared to face rising defaults and loan losses at that time, particular attention was drawn to the fact that the previous year had seen increases in the ratio of large exposures to capital and in the proportion of holding companies among borrowers. the report emphasised that there was good reason to scrutinise this development closely. the central bank had actually noted this in earlier publications as well. for the near term, the banks ’ most critical task was to guarantee access to foreign credit and reduce their borrowing requirement. furthermore, confidence among investors and depositors was of vital importance. it was deemed unlikely that conditions in the international markets would improve to any dramatic extent in the near future, and when they did, investors would undoubtedly demonstrate more caution and conservatism than they had previously. in addition to this, the report shed light on the banks ’ very large re - financing needs in the next few years : they would need to re - finance 35 billion euros in foreign bonds through 2012, including 17 billion in 2009 and 2010. some critics have maintained that, in the may 2008 issue of financial stability, the central bank contradicted its own knowledge of the state of the banks – or even that it did not know any better. this is untrue. the report examined in a transparent manner the financial system ’ s weaknesses, as well as its strengths. the developments in the global arena since the spring of 2008 rendered the risks mentioned in financial stability far more serious than was foreseen. in its monetary policy statement in july 2008, the board of governors said inter alia that “ iceland ’ s commercial banks play an important role in maintaining confidence in the financial system. under the current global financial market conditions, they must protect their liquidity and capital position, seek all possible ways to reduce their need for foreign credit, and adapt the scope of their operations to dramatically changed circumstances. ” throughout 2008, the central bank of iceland focused increasing attention on the developments and operational outlook at the nation ’ s financial institutions – particularly its large banks. among other things, it monitored their liquidity much more closely and frequently than is stipulated in the bank ’ s rules on liquidity requirements, and considerably more than had been customary. the central bank met with leaders from the large commercial banks and reviewed various aspects of their operations, requesting information