BIS chief warns soaring debt, market changes could complicate future crisis response - Reuters

The Bank for International Settlements is flagging a structural challenge for the next downturn: the tools central banks relied on in past crises may not work as well this time. Its chief points to soaring debt levels and shifts in how markets function as factors that could complicate any future crisis response — a concern about capacity, not a prediction of imminent trouble.

The mechanism matters. When public and private debt is already high, further borrowing to cushion a shock becomes harder, and heavily indebted borrowers are more sensitive to rising rates. At the same time, changing market structure — including a greater role for non-bank financial institutions — can affect how liquidity moves under stress, potentially making interventions less predictable.

For markets, the takeaway is that the policy "backstop" assumed in many risk models may be less reliable than in past cycles. Watch sovereign debt trajectories, the resilience of non-bank intermediaries, and how central banks describe their remaining room to maneuver. These are signposts for how much support policymakers could realistically provide.