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September 29, 2015

Wildest market swings since 2008 put regulators on edge

“This week’s sharp commodity-driven selloff will set alarm bells ringing once again for global regulators who are growing increasingly nervous that, after 12 months of market shocks, the next one might be too big for them to handle.

“With three months to go, 2015 is already the most volatile calendar year for markets since the depths of the global crisis in 2008, according to analysis from State Street Global Advisors.

“Last week the Bank of England and European Union both issued financial stability reports echoing concerns from the Bank for International Settlements that historically low interest rates are fuelling market volatility and distortions.”

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“But what if the next seismic shock lasts longer?

“The key question is not so much whether markets will rise or fall. The issue is the extent to which the financial system can absorb such movements, lick its wounds and resume,” said Robert Jenkins, Senior Fellow at Better Markets and a former member of the BoE’s Financial Policy Committee.

“Seven years on from (the collapse of) Lehman (Brothers that triggered the financial crisis) the banking system remains excessively leveraged and central bank policies continue to prompt savers to take risks they are ill-equipped to take.”

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Read the full Reuters article by Jamie McGeever here.

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