buck ” could not participate. this example raises several interesting issues. in keeping with previous examples, it illustrates the extreme non - contractual lengths some of the asset managers were willing to go to in order to protect their reputations. it also shows how the equivalent of a “ bank run ” can happen in the shadow banking system. and it shows the potential importance of public sector support – another complicating factor that makes the true risks in a tail event difficult to assess. as a final example in this section, we have deutsche bank ’ s decision in december 2008 not to call a lower tier 2 subordinated debt issue ( a €1bn 2004 / 2014 bond with a call date of jan 16 2009 ), despite the fact that it was customary for banks to call such bonds at the first possible date. the reason that this is interesting is that it was actually economically rational in japan, money market funds lost much of their appeal after principal losses due to enron - related investments, and investors largely returned to bank deposits. see brewster and chung, 17 september 2008, “ fear of money market funds ‘ breaking the buck ’ ”, the financial times, and moody ’ s investor service, august 9. 2010, “ sponsor support key to money market funds ”. bis central bankers ’ speeches in isolation for deutsche bank not to call, and it was fully within its right not to do so, but still, investors became infuriated and the consequent short - term adverse reaction almost certainly cost deutsche and its shareholders a multiple of the gain it received from not calling the bond. despite that initial investor reaction, however, deutsche was able to keep market access and to successfully issue further capital instruments in the months thereafter. the theme we have encountered in these examples is that many of the decisions taken during times of extreme pressure seem to be affected by ( apparent ) considerations outside of the immediate financial contract – at least, rejecting options which were perceived to be acceptable when the original contract was struck. or that the financial consequences of particular decisions were more adverse for the decision maker ( or more generally the markets ) than anticipated. in that sense they are classic examples of time inconsistency. we have tried to illustrate how acting narrowly rationally when it is perceived to be outside the realm of “ what is normally done ”, can carry massive risks. the problem that this creates is that when we are dealing with tail events and disaster insurance, it is hard to determine ex ante what such insurance contracts (

limited. we now know all of that changed when sub - prime mortgage assets had become a significant portion of the assets in a typical siv. the us housing market had started to slide and the lax underwriting standards started to show their impact on recovery rates. suddenly, investors in the abcp market came to realize that the risk of actual loss was very real and that a game of “ musical chairs ” was unfolding in the roll - over process of the short - term debt. at this juncture, one would think that the optimal economic behaviour for the banks with outstanding sivs, would be to let the sivs unwind according to the legal construct in place, rather than accept responsibility. in fact, all the banks except one decided to collapse the structures and repurchase the securities10. from an investor protection standpoint, one may have drawn a sigh of relief, as any potential issues about misrepresented risk profile disappeared, but from a financial stability perspective, it was obviously disturbing. in a short space of time, billions of assets showed up on already over - extended bank balance sheets. one may think it somewhat surprising that ( almost ) all the banks decided to absorb their sivs, especially since it must have seemed likely that the siv structure would not come back any time quickly as a viable funding structure. we believe that the main reason for doing this was that not doing so would have sent a distress signal to the market. in other words, if a bank chose not to absorb this problem, the perception would be that they simply could not afford to do it, thus telling the market that they were in even worse shape than previously feared. there may also have been an element of “ repeat game ”. if one lets one ’ s investors take the pain, then they may not return for future transactions. it seems plausible that if the siv crisis had transpired during a time when most other markets had remained functioning, the decision making process might have been very different. “ signalling ” is at its most powerful when the level of uncertainty in the system is highest. 11 the one notable exception was standard chartered, which let its “ whistlejacket ” siv unwind. the issues arising from abcp conduits were similar, although the structures were slightly different. the key difference from sivs was that the underlying assets were largely purchased from third - parties and not necessarily in securities form. bis central bankers ’ speeches we now want to turn to an example of