The Bank for International Settlements warned in its latest quarterly assessment that financial fragility is rising as leverage climbs sharply and underlying debt structures become more opaque. According to Odaily, BIS economic analysis and statistics head Frank Smets said cross-market leverage is concerning because it can amplify normal market moves into severe systemic shocks.
The report cited July’s turmoil at Leopold Aschenbrenner’s Situational Awareness fund as an example. The fund, which had heavily bet on AI, faced repeated margin calls after the value of its underlying assets fell sharply and later transferred core holdings in its public equity portfolio to Ken Griffin’s Citadel to ease a liquidity crunch.