LONDON – The Bank of England highlighted what it sees as the greatest threats to the financial system in its twice-yearly Financial Stability report published yesterday: UNCERTAIN ASSET VALUES: Rising macroeconomic and counterparty risk has made it hard to determine the value of banks’ asset portfolios.
UNDERCAPITALISATION OF BANKS: Authorities around the world have moved to shore up the banking system but there is a risk of an erosion of public confidence after a prolonged period in which risk has been underpriced. DEPENDENCE ON WHOLESALE FUNDING MARKETS: Financial institutions that remain dependent on wholesale funding markets could have difficulty rolling over debt when it comes due.DOMINO EFFECT: The globalisation of asset exposures has led to interconnections between firms in the global financial system, which may be under-appreciated.Nampa-ReutersDEPENDENCE ON WHOLESALE FUNDING MARKETS: Financial institutions that remain dependent on wholesale funding markets could have difficulty rolling over debt when it comes due.DOMINO EFFECT: The globalisation of asset exposures has led to interconnections between firms in the global financial system, which may be under-appreciated.Nampa-Reuters
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