FSB's Carney urges investor caution on valuing risks

Mon Jan 28, 2013 2:57pm EST
 

By Emma Thomasson and Huw Jones

ZURICH/LONDON (Reuters) - Investors must not be complacent in valuing assets after efforts by central banks to pump money into struggling economies, a global financial risk watchdog said on Monday.

After a meeting in Zurich, the Financial Stability Board (FSB) chaired by Mark Carney said risks remain even though markets have improved and banks are in a healthier state.

"Medium-term downside risks remain, given weak growth prospects and high levels of public and private sector debt in many economies. Continued strains on bank asset quality reinforce the need to complete financial repair," Carney said.

"Market participants and authorities need to be on guard against mispricing of risk and valuations of assets," he said, adding that low market valuations of banks was partly due to investor concerns over their asset valuation practices.

However, Carney sounded a more optimistic note in his personal comments on the progress made by banks.

"I'm not going to make a buy, sell, hold call on the global banking system from an equity perspective," said Carney, who is also governor of the Bank of Canada and set to take the top job at the Bank of England in July.

"I merely observe that in major jurisdictions a considerable amount of capital has been raised over the course of the last few years, upwards of 600 billion since the crisis," Carney told a news conference at the end of an FSB meeting.

Worries over banks has come to the fore again with problems at Italian lender Monte dei Paschi di Siena (BMPS.MI: Quote) but Carney said this was not discussed on Monday.   Continued...

 
Mark Carney, Bank of Canada Governor and chairman of the Financial Stability Board speaks during a news conference after a Financial Stability Board plenary meeting in Zurich, January 28, 2013. REUTERS/Michael Buholzer