The Bank for International Settlements (BIS) warned central banks and investors to address potential vulnerabilities as rising leverage across several markets could magnify normal market volatility. The warning cited the Situational Awareness Fund’s near-collapse in July as a cautionary example. Gaston Gelos, BIS head of financial stability policy, said hedge funds now sit at the core of core markets, creating vulnerabilities tied to high leverage and liquidity. Liquidity can be plentiful during favorable conditions but disappear rapidly under stress. Frank Smets, BIS head of economic analysis and statistics, said market pressure has not yet materialized, but that should not encourage complacency because the durability of risk-asset resilience remains uncertain.