Federal Reserve Vice Chairman Stanley Fischer pointed to higher asset prices as well as increased vulnerabilities for both household and corporate borrowers in warning against complacency when gauging the safety of the global financial system.

“There is no doubt the soundness and resilience of our financial system has improved since the 2007-09 crisis,” Fischer said in the text of a speech Tuesday in Washington. “However, it would be foolish to think we have eliminated all risks.”

Policy makers at developed-market central banks have been on the lookout for asset price bubbles and other signs of financial instability after years of trying to stimulate sluggish economies with historically loose monetary policy. So far they’ve not identified any severe threats that might force them to tighten policy in response.

While characterizing the overall level of vulnerabilities as “moderate,”’ Fischer outlined a number of points that merit some worry and vigilance.

The price of “risky assets,” he said, had increased in most major asset markets in recent months, including equities, which now stand in the top quintile of historical distributions.

“The general rise in valuation pressures may be partly explained by a generally brighter economic outlook, but there are signs that risk appetite increased as well,” he said. “So far, the evidently high risk appetite has not lead to increased leverage across the financial system, but close monitoring is warranted.”

Corporate Leverage

Leverage among financial institutions, he noted, is at historically low levels, “however, the corporate business sector appears to be notably leveraged, with the current aggregate corporate-sector leverage standing near 20-year highs.”

In households, strains caused by high student loan balances and rising auto-loan delinquencies, he said, leave many borrowers vulnerable to adverse shocks.

“At first glance, one is tempted to say that the potential for this distress to adversely affect the financial system seems moderate,” Fischer said. “But, on second thought, one should remember that pre-crisis subprime mortgage loans were dismissed as a stability risk because they accounted for only about 13 percent of household mortgages.”