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(Bloomberg) -- Central banks concerned about the effects of raising rates too fast shouldn’t underestimate the risks of delaying action, the general manager of the Bank for International Settlements said.

“Postponing normalization too much also has risks,” Jaime Caruana, whose term at the head of the central banks’ central bank expires on Thursday, said in an interview last week at the BIS headquarters in Basel. “Why? Because there is more risk-taking and it’s difficult to know where the risk-taking will go.”

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After deploying unprecedented measures to jolt the global economy back to life after the financial crisis, central banks are now starting to withdraw stimulus amid growing concerns that asset prices are getting out of hand. The Federal Reserve raised interest rates and started shrinking its balance sheet. The Bank of England also increased borrowing costs for the first time in a decade while the European Central Bank has announced it will halve bond-buying from 2018.

Yet the pullback has been gradual and cautious for fear of sparking a market rout that would unsettle the upswing. The BIS, which constantly warns about the risks of too lax policy in its research, thinks prudence has gone too far.

‘Bit Complacent’

“The markets are a little bit complacent at this very moment with the present situation,” said Caruana, a former governor of the Bank of Spain. They are “too reliant on the idea that interest rates and inflation will remain low for long and therefore there is a good environment for additional risk-taking.”

Particularly concerning for the BIS chief is the build-up of leverage in the global economy. Levels of debt, he warned, are significantly higher than they were before the financial crisis.

“Balance sheets are now larger, there’s more debt, and on the asset side, the asset valuations are rich. This is a combination that I think requires some caution and vigilance,” he said. “It is true that the financial system, particularly the banking system, is now better capitalized. This is a positive element. But again, there’s more debt globally. ”

After eight years at the BIS, Caruana will be succeeded as general manager by former Bank of Mexico Governor Agustin Carstens on Dec. 1.

To contact the reporters on this story: Alessandro Speciale in Frankfurt at aspeciale@bloomberg.net, Catherine Bosley in Zurich at cbosley1@bloomberg.net.

To contact the editors responsible for this story: Paul Gordon at pgordon6@bloomberg.net, Brian Swint, Kevin Costelloe

©2017 Bloomberg L.P.

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