BIS chief says soaring debt and non-bank finance will make the next crisis harder to fight

The Bank for International Settlements said on Monday that soaring debt and changes in market structure could complicate future crisis response^3,5. High public debt, the growing role of non-bank investors and faster-moving digital risks could all make crisis management harder, the BIS said^2,4.

The warning came from Pablo Hernandez de Cos, speaking in Vienna^1,4. He is one of the frontrunners to succeed Christine Lagarde as president of the European Central Bank^1,3. His remarks were delivered under the title of the role of central banks in managing financial crises in times of rapid change, and drew on the BIS’s own work, including its 2024 annual report chapter on monetary policy in the 21st century⁶.

He said the Bank of England’s response “offers a blueprint” for how central banks should use asset purchases as a crisis-fighting tool^7,8. He added that “central bank swap lines will remain critically important in stabilizing the global financial system during periods of severe stress”⁹.

Why it matters to investors

The institution speaking is the one central banks use to coordinate, and its message is that the backstop investors assume exists may be slower and more constrained than in past episodes^4,5. Two of the three named frictions sit outside the banking system that supervisors control directly: non-bank investors now hold a growing share of market risk, and digital channels move stress faster than before².

The third friction is fiscal. High public debt limits how far governments can absorb a shock before bond markets react, which in turn conditions what a central bank can do with its balance sheet^2,5. Against that, de Cos’s endorsement of the Bank of England’s asset-purchase playbook and of swap lines tells investors which instruments the official sector still expects to reach for^7,9.

What to watch

De Cos’s candidacy for the ECB presidency gives these remarks a second reading, since the same views would shape euro-area policy if he succeeds Lagarde^1,3. Watch whether other central banks echo the framing of non-bank finance and digital speed as the binding constraints^2,4, and whether swap-line capacity is reaffirmed in practice as well as in speeches^6,9.

De Cos presented the Bank of England’s episode as a blueprint rather than as an exception^7,8, while describing swap lines as critically important during periods of severe stress⁹. Whether that combination is sufficient when public debt is already high is the question his own list of frictions leaves open^2,5.