The US dollar has become increasingly important as a barometer of how willing financial firms are to use their balance sheets to take on risk, research by economists at the Bank for International Settlements finds.

In a working paper, Burcu Erik, Marco Lombardi, Dubravko Mihaljek and Hyun Song Shin note three key changes since the global financial crisis. The growth of assets in the banking sector has been “noticeably subdued”, they say. The negative relationship between volatility as measured