"I am concerned about attitudes to risk in some areas of the financial markets," the International Monetary Fund managing director said, according to the prepared text of a speech in Toronto.

Rato said that capital flows into emerging markets, for example, are beneficial, but that some investors may be ignoring the high risks these investments may face.

"On the face of it, there appears to be a greater willingness to take risks in financial markets, motivated in part by the search for yield and in part by greater ease in transferring risk," he said.

Rato pointed to the overconfidence of some market players: "This may reflect not so much a conscious decision to take risks as an underestimation of the extent of risks by some market participants and a reckless disregard of risks by others."

He offered the example of the proliferation of high-risk, or subprime, mortgage loans in the US housing sector during a housing boom in recent years that collapsed over a year ago.

The IMF called on central banks to scrutinize inflation risks more closely.

"The global economy is now in a position where pre-emptive action to contain inflation risks may be particularly important," he said.

Rato also expressed concern about the substantial flows of capital into some emerging countries, saying although they were welcome, "they also expose the countries concerned to an abrupt reversal of flows when sudden shocks occur."

BEIJING CONCERNED ABOUT NEW IMF SURVEILLANCE

Another report from Shanghai adds: China's central bank Wednesday expressed reservations about new International Monetary Fund rules on exchange rate policy which it believes may not reflect the views of developing countries.

The IMF released new rules last Friday aimed at overhauling its surveillance program, under which the Washington-based international lending agency seeks to promote exchange rate stability in the global economy.

But China's central bank said in a statement that the exchange rate adjustments had a certain role to play in resolving external economic imbalances, but were not the ultimate or only policy instrument.

"Large and disorderly exchange rate adjustments will not only exacerbate external instability, but also affect the sustainability of a country's domestic economic growth, and subsequently the sustainable growth of the global economy and the stability of international financial markets," the central bank said.

"The Fund, in its surveillance over policies of members, should take into full consideration the fundamental impacts of economic globalisation... and to value the relationship between domestic economic stability and external stability."