ROME — The Financial Stability Board (FSB) on Tuesday warned of "vulnerabilities" in the global financial system including "pockets of weakness" in banks and higher risk-taking because of low interest rates.
The FSB also urged governments to take "immediate, concrete steps" to implement commitments on reforming the market for derivatives -- complex financial products seen as one of the factors in the global financial crisis.
"The FSB emphasised the need to decisively press ahead with the repair and strengthening of weak banking systems," FSB chairman and Italian central bank governor Mario Draghi told reporters after a meeting of the board.
"There are signs that the low interest rate environment... may be leading investors to search for yield in more complex non-standard market segments that increase exposure to liquidity risks," he said in Rome.
"When you have prolonged periods of very low interest rates you have several incentives that are in place to increase risk-taking," he said.
"The quality of the lending should remain high.... We are calling on supervisors to look at their lending books with increased attention," he added.
The FSB brings together financial authorities from 24 countries and has been charged by the Group of 20 (G20) leading economies of the world to oversee efforts to reform the financial system in the wake of the economic crisis.
The FSB also urged governments to take "immediate, concrete steps" to implement commitments on reforming the market for derivatives -- complex financial products seen as one of the factors in the global financial crisis.
"The FSB emphasised the need to decisively press ahead with the repair and strengthening of weak banking systems," FSB chairman and Italian central bank governor Mario Draghi told reporters after a meeting of the board.
"There are signs that the low interest rate environment... may be leading investors to search for yield in more complex non-standard market segments that increase exposure to liquidity risks," he said in Rome.
"When you have prolonged periods of very low interest rates you have several incentives that are in place to increase risk-taking," he said.
"The quality of the lending should remain high.... We are calling on supervisors to look at their lending books with increased attention," he added.
The FSB brings together financial authorities from 24 countries and has been charged by the Group of 20 (G20) leading economies of the world to oversee efforts to reform the financial system in the wake of the economic crisis.
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