Markets could face ‘sharp correction’, Bank of England warns

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LONDON (Reuters) – The historically high value of financial assets could correct sharply if investors reassess the prospects for recovery from COVID-19, with signs of increased risk-taking at investment banks, the Bank of England said on Friday.

The BoE’s Financial Policy Committee (FPC) said in a statement there was evidence that risk-taking remained elevated in a number of financial markets relative to historic levels.

“Asset valuations could correct sharply if, for example, market participants re‐evaluate the prospects for growth, inflation or interest rates,” the statement said.

“There are signs of continued loosening in underwriting standards and increased risk-taking in some investment banking businesses.”

(Reporting by Huw Jones and William Schomberg; editing by Sarah Young)

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