Salient to Investors:
BOE said rising equity markets don’t reflect the underlying economies and underestimates risks in the financial system. Potential threats to the financial system include the re-emergence of some elements of market behavior not seen since before the financial crisis, including a relaxation in some US credit markets of non-price terms and increased issuance of synthetic products.
BOE said banks’ leverage ratios would remain very high even after the new recommendations were met and there would remain little margin for error against a backdrop of low growth in the advanced economies.
Axel Weber at UBS said last month that the economy has not kept up with investor sentiment and the rally in financial markets could be a misleading signal – we are not out of the woods yet.
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