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The “bundling and unbundling, slicing and dicing of risks”? ABCP conduits? Monoline credit insurers?

These are phrases of the moment.

How about this as a description of the finer points of the current financial fiasco, as the difficulties in US subprime lending have spawned drama across other spheres:

The extent that the banking system can change from being the ‘originator and holder’ to ‘originator and distributor’ of credit risk may be limited by the close link between credit and provision of liquidity.

Credit risk is being transferred from banks to insurance companies and other capital market investors. But if credit losses crystallise in stressed market conditions, insurance companies may need to have recourse to the banking system in order to meet their obligations under credit risk transfer instruments, which typically require more prompt settlement than insurance claims.

And in precisely those circumstances, corporate customers or ABCP conduits might need to draw down committed credit lines from banks. At this fundamental level, the banking system is likely to remain the final source of liquidity, and therefore contingent taker of the associated credit risk, for as long as bank liabilities (deposits) are regarded as uniquely liquid.

Which is exactly what has been happening - with Sachsen LB in Germany, with the commercial paper market in Canada, with Countrywide in the US.

Except that the above paragraphs are not taken from a recent press report, or an analysis of the current market ructions.

They are from a Bank of England report written by David Rule, then at the G10 financial surveillance division, almost six years ago. The report was called Risk transfer between banks, insurance companies and capital markets: an overview and published as part of the BoE’s financial stability review in December 2001.

Covering the full gamut of acronym-rich arenas that have been filling the pages of the FT and other newspapers in recent weeks, he gallops through the ways in which risk could be traded and passed around - drawing attention to the worry that, when the good times stop, institutions are not fully aware of where all that risk has ended up.

As Gillian Tett wrote at the end of last week, financial innovation is all very well but, conduits and SIVs have shown that as innovation has enabled the offloading of risk through the front door, it has crept back into the banking system via other routes.

Whether it is monoline insurers, which Mr Rule characterises as a business that writes “put options that are some way out-of-the-money to protect investors against extreme market events,” or the commercial paper conduits, when times get tough that sliced and diced risk ends up back on the banks’ doormat.

And. if and when it does, that risk just might look slightly different.