The Financial Times article examines how quantitative easing (QE) fundamentally altered banking sector dynamics and why the subsequent quantitative tightening (QT) poses significant risks. During QE, central banks purchased massive amounts of government bonds, flooding banks with reserves and suppressing yields. This environment encouraged banks to expand balance sheets, increase leverage, and shift toward longer-duration assets.

As central banks now reverse course through QT, draining reserves and raising rates, banks face simultaneous pressure on asset values and funding costs. The article highlights how regulatory changes post-2008 interacted with QE to create new vulnerabilities, particularly around interest rate risk and liquidity mismatches. With $9 trillion in central bank balance sheet reduction underway, the transition threatens to expose weaknesses built during the easy money era.