home mortgages sparked concerns about the performance of a range of securities with exposure to those mortgages, and investors quickly pulled back. with secondary markets under significant strain, a number of large originators announced substantial changes to their subprime - mortgage programs, and the volume of newly issued securities backed by subprime mortgages fell precipitously and stayed low. the same forces also damped investors'willingness to fund other types of nonconforming mortgages ( that is, loans that do not qualify for sale to fannie mae and freddie mac ). the issuance of securities backed by mortgages in so - called " alt - a " pools – which consist of loans to borrowers who typically have higher credit scores than subprime borrowers but whose applications may have other risky attributes – declined markedly. prime jumbo home - purchase loans continued to be originated, but the spread of rates on such loans over those on conforming loans was considerably higher than earlier in the year, and banks reportedly tightened lending standards and other loan terms, as well. in terms of the macroeconomic outlook, this substantial tightening in mortgage markets seemed likely to increase the odds of a deeper and more long - lasting contraction in the housing market. the mounting losses from securities backed by subprime mortgages led investors to lose confidence in structured finance products more generally – investors apparently had relied heavily on credit - rating firms to determine the quality of these often - complex instruments rather than perform their own independent evaluations. once losses began to mount, the earlier lack of due diligence by investors brought them to the realization that they had an insufficient amount of information about these products, and the normal price - discovery mechanism began to break down. 1 the concerns about structured credit products led to severe problems in markets for asset - backed commercial paper ( abcp ), where spreads spiked and programs had difficulty issuing paper with maturities longer than a few days. the largest banks began to worry about difficult - to - forecast expansions of their balance sheets – they recognized that they might have to provide backup funding to commercial paper programs that were no longer able to over their paper, and they faced substantial challenges syndicating the leveraged loans they had underwritten. as a result, banks became very protective of their liquidity, and interbank funding markets came under considerable pressure. moreover, the extent to which banks were protecting their liquidity randall s. kroszner ( 2007 ), " recent events in financial markets

as regulators use all the tools at our disposal, implement new and innovative ways to communicate, share information and ensure that we develop apace with the market and its needs, because without doing so we cannot create and sustain an effective cross - border financial integration. south african reserve bank. bank supervision department annual report 2012. association of african central banks. 2012. roundtable on regional banks in africa : “ safeguarding and leveraging a new force for financial sector development in africa ”. bis central bankers ’ speeches i look forward to further informative discussions on the topic, such that we all may learn from past mistakes, successes and achievements whilst also continuously striving to address the challenges in unison with one another. thank you. bis central bankers ’ speeches