The BIS Botta building in Basel, Switzerland (courtesy

The Bank for International Settlements in Basel, Switzerland, Sunday warned investors are driving up the prices of stocks and other assets to dangerous levels in their quest for earning better returns than interest rates provide.

General Manager Jaime Caruana told the annual meeting recovery from the financial crisis that began in 2007 is going to continue to be slow, especially in Europe, because of high debt levels, the New York Times reported.

The report by the organization, the global forum for central bankers, said there's a disturbing disconnect between market "buoyancy and underlying economic conditions globally."

"Several early warning indicators signal that vulnerabilities have been building up in the financial systems of several countries," the report said.

"The temptation to postpone adjustment can prove irresistible, especially when times are good and financial booms sprinkle the fairy dust of illusory riches,” the report said. “The consequence is a growth model that relies too much on debt, both private and public, and which over time sows the seeds of its own demise.”

The organization, which acts as a clearinghouse for central bank transactions, uses its annual report to get the attention of political leaders, commercial bankers and investors and called on governments to improve their countries' economic performance.

"There is a disappointing element of déjà vu in all this,” Claudio Borio, head of the monetary and economic department at the bank told the Times. He described the report as “a call to action.”

“The signs of financial imbalances are there,” he added. “That’s why we are emphasizing it is important to take further action while the time is still there.”

Borio downplayed the risk of serious deflation and chided corporations for not making investments amid booming stock markets.

The report noted emerging markets have borrowed more than $2 trillion since 2008, leaving them vulnerable should the economy turn south, Bloomberg reported.

“Like an elephant in a paddling pool, the huge size disparity between global investor portfolios and recipient markets can amplify distortions,” the report said. “It is far from reassuring that these flows have swelled on the back of an aggressive search for yield: strongly pro-cyclical, they surge and reverse as conditions and sentiment change.”

The report also noted the gap between residential property prices and long-term trends could be a warning of more trouble in that sector, Reuters reported.