Prolonged periods of financial stability encourage risk‑taking and can create costly vulnerabilities in the banking system, so vigilance is essential to avoid painful crises later

Analysis

The claim resonates because past crises—such as the 2008 global financial collapse and India’s NPA crisis—are fresh in public memory, leading people to link calm periods with hidden danger. However, the relationship is not deterministic; not every stable phase ends in crisis, and other factors like regulatory reforms can mitigate risk. Emphasising vigilance helps policymakers justify tighter supervision, but it can also be used to signal future policy tightening, affecting market expectations. Readers should understand that while history shows a pattern, the magnitude of “costs” is uncertain and depends on how authorities respond to emerging vulnerabilities.