International markets still affected by US crisis

Photo: International markets still affected by US crisis

The credit crisis that shocked the world in recent months still keeps the international markets vulnerable, the Bank of England said Thursday.

The central bank said that there have been some signs of recovery in recent weeks, but added that stocks, commercial property and credit markets in the developed world could still take another hit, particularly if an anticipated U.S. slowdown is deeper than anticipated.

"In the short run, the financial system in the advanced economies remains vulnerable to further adjustments, whether in the credit markets ... or, for example, in the equity or commercial property markets," the bank said in its biannual Financial Stability Report.

The bank said that uncertainty about U.S. growth prospects had risen in recent months and "there is a pronounced downward skew to these forecasts."

"A deeper downturn in the United States and rising credit defaults could trigger a further round of asset price falls," the bank said. "Equity markets seem particularly vulnerable," it said.

The global credit crisis was sparked by rising defaults in the United States on subprime mortgages, home loans provided to borrowers with weak credit. Those problems spread to other areas as those debts were repackaged with other less risky debts and sold on to other lenders.

Banks and other institutions have since tightened standards for loans to consumers and businesses.