<> on September 24, 2010 in London, England.

When New York-based investment bank Lehman Brothers collapsed on 15 September 2008, the world woke up to the ugly reality that financial market exuberance under passive regulation can be perilous. The run-up to the crisis—the biggest after the Great Depression in the 1930s—was marked by telltale signs – unbridled growth of the mortgage market supported by abysmally low interest rates, predatory lending aided by lax regulation, exotic financial engineering that allowed reckless bundling of low-quality credit that was then repacked under the garb of securitization and an unprecedented  housing bubble which pushed prices of residential units in the US by 124% between 1998 and 2006.

It required massive intervention by the US government and the Federal Reserve in terms of bailouts, forced takeovers of failing institutions, security purchases and liquidity injections to put the market back on the rails.

Ten years later, regulators say policy measures taken in the aftermath of the crisis have made financial markets, especially banks, stronger and safer. And there are enough reasons to believe them – the stock markets in the US have been seeing the longest bull-run in history, tax cuts are in full swing, investment and commercial banks have posted impressive profits, bankers have been reaping record bonuses. There are other positive signals too—US consumers enjoy a lower debt ratio, delinquency rates are down and debt service ratio is down.

However, a closer look at a few of the emerging market trends would reveal that things are pretty tumultuous beneath the calm surface and that another crisis may be around the corner.

For instance, after a period close regulatory monitoring, deregulation has started lifting its ugly head again—the Fed is likely to ease limits on how much banks can borrow and the US Congress may soon dismantle a sting of legislations, including Dodd-Frank Act that helped enforce strong regulations after the financial market meltdown 10 years ago.

According to an analysis of booms and busts since the 18th century by IMF economist Jihad Dagher, for 300 years, there has been a repeated cycle of booms followed by deregulation, crises and re-regulation. As the Donald Trump administration is hurrying to ease banking regulations introduced in the aftermath of the 2008 crisis, many expect the next major financial cataclysm to hit anytime now.

The growth of the shadow banking industry—where entities that are not banks provide banking-like services—is another cause of concern. According to a recent study by Financial Stability Board, the global shadow banking sector has grown to a size of around $54 trillion, representing around 13% of the financial system on planet Earth. Among large and growing economies, China is looking at the scary scenario of shadow banking making up more than a quarter of total banking assets. At a time when banks begin to enjoy the fruits of deregulation, one can imagine the risk posed by shadow banking players as they are completely outside the ambit of regulatory scrutiny.

This is exacerbated by an equally buoyant growth of nonbank mortgage lenders. As legacy banks have, of late, trimmed the volume of mortgages they offer, nonbanking players have stepped up lending. As per a report by National Community Reinvestment Coalition (NCRC), in 2007, 56% of mortgage originations in the US come from nonbanks, up from 35% in 2010.

The mushrooming of fintech firms offering cheap credit too aggravates this problem. In the US, personal loan outstanding grew to about $120 billion as of 31 March 2018 from $72 billion a decade ago, according to data from TransUnion. Financial technology firms such as Avant, Prosper and Lending Clubaccount for about a third of this lending. Since these loans are collateralized, they can result in huge losses for lenders if borrowers, especially those with lower credit scores, default in an economic downturn.

Surging levels of corporate debt globally is another trend that may soon spoil the Wall Street party.According to a recent report by McKinsey, global corporate debt more than doubled to $66 trillion in the past decade. A major chunk of this has been raised in emerging markets and many companies have taken advantage of low interest rates to borrow in US dollars. Default is likely for one-fourth of corporate issues made in emerging countries, as per the study. This leads to yet another domino effect—rising corporate results in declining credit quality.

Besides, collateralized debt obligations (CDOs) that caused so much chaos during the 2008 crisis have made a quiet come-back in the form of collateralized loan obligations (CLOs)—a form of securitisation where payments from multiple middle-sized and large business loans are pooled together and passed on to different classes of owners in various tranches.According to a Bloomberg report, the prolonged stock market bull-run has led to a situation where CLOs are being targeted at individual retail investors.

The question is not if another crisis is on the cards, but how devastating that would be.