The trouble in financial markets is not over yet, and stocks, commercial property and credit markets could suffer a further hit, the Bank of England said today.
The ferocity with which the crisis took hold was a shock, and the authorities need to strengthen their management arrangements in the wake of the Northern Rock debacle, the country's first bank run in more than a century, the central bank said in its twice-yearly Financial Stability Report.
Things are starting to look better, the bank added, and the strength of the economy and banking sector should help the financial system ride out the current storm, but further shocks are possible whether at home or abroad.
"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."
Equity markets are trading near multi-year highs, although the FTSE-100 index ended Wednesday's session down 0.5 per cent at 6,482.
The bank said that while there had been signs of recovery, returning to earlier conditions of under-priced risk would, in any case, be undesirable.