Low interest rates have led investors to start taking risks that could create the conditions for a new crisis, according to the world's leading financial watchdog.
In a strong warning to regulators around the world, the Financial Stability Board said that investors were taking "non-standard" risks as they search for assets that offer them an attractive yield.
The FSB singled out exchange-traded funds, commodities and high-yield markets as areas of particular concerns and called on regulators to keep a close eye on developments.
"There are signs that the low interest rate environment, which has been necessary to support growth and financial sector recovery, may be leading investors to search for yield in more complex non-standard market segments that increase exposure to liquidity risks," said the FSB.
The warning extended to emerging markets, which have been the subject of large inflows of new money since the financial crisis as investors have sought out growth.
The FSA warned there was an increasing risk in emerging market economies of "asset price inflation and other financial imbalances".
Its warnings followed a meeting in Rome of all the main financial regulators from around the world to discuss developments in the markets and how the world's financial system can be made safer.
Officials from the Treasury, Bank of England and Financial Services Authority represented the UK at the meeting.
The conference acts as a high-level talking shop for all the world's most important central bankers, with officials from the US Department of the Treasury, Chinese Ministry of Finance, and European Central Bank all present.
Regulators at the conference made clear their concerns at the consequences of a sudden change in interest rates and additional credit losses. It said it was important that countries continued to work on repairing and strengthening their banking systems.
As part of a global effort to make the banking system safer, an agreement was reached to accelerate the process of identifying the world's most systemically important banks ahead of the G20 summit in November at which recommendations will be made on how to regulate these mega banks.
Among the proposals likely to be put forward in November will be requirements for so-called global systemically important financial institutions to hold more loss-absorbing capital than their smaller peers.
The banks will also be expected to sign up to a resolution regime, meaning that should they ever get into difficulties there will be a plan for how they could be broken up to ensure vital parts of the world's financial infrastructure are not put in danger.
In addition, the FSB is to push ahead with new recommendations for the shadow banking sector of hedge funds.
Source: www.telegraph.co.uk
In a strong warning to regulators around the world, the Financial Stability Board said that investors were taking "non-standard" risks as they search for assets that offer them an attractive yield.
The FSB singled out exchange-traded funds, commodities and high-yield markets as areas of particular concerns and called on regulators to keep a close eye on developments.
"There are signs that the low interest rate environment, which has been necessary to support growth and financial sector recovery, may be leading investors to search for yield in more complex non-standard market segments that increase exposure to liquidity risks," said the FSB.
The warning extended to emerging markets, which have been the subject of large inflows of new money since the financial crisis as investors have sought out growth.
The FSA warned there was an increasing risk in emerging market economies of "asset price inflation and other financial imbalances".
Its warnings followed a meeting in Rome of all the main financial regulators from around the world to discuss developments in the markets and how the world's financial system can be made safer.
Officials from the Treasury, Bank of England and Financial Services Authority represented the UK at the meeting.
The conference acts as a high-level talking shop for all the world's most important central bankers, with officials from the US Department of the Treasury, Chinese Ministry of Finance, and European Central Bank all present.
Regulators at the conference made clear their concerns at the consequences of a sudden change in interest rates and additional credit losses. It said it was important that countries continued to work on repairing and strengthening their banking systems.
As part of a global effort to make the banking system safer, an agreement was reached to accelerate the process of identifying the world's most systemically important banks ahead of the G20 summit in November at which recommendations will be made on how to regulate these mega banks.
Among the proposals likely to be put forward in November will be requirements for so-called global systemically important financial institutions to hold more loss-absorbing capital than their smaller peers.
The banks will also be expected to sign up to a resolution regime, meaning that should they ever get into difficulties there will be a plan for how they could be broken up to ensure vital parts of the world's financial infrastructure are not put in danger.
In addition, the FSB is to push ahead with new recommendations for the shadow banking sector of hedge funds.
Source: www.telegraph.co.uk
No comments:
Post a Comment