Joining the chorus of voices worried that potential asset bubbles could unsettle the global financial system, a group representing the world's largest banks urged policymakers to take steps to ensure that heavy capital flows into emerging markets do not trigger excessive risk-taking.

The Institute of International Finance's Market Monitoring Group warned Thursday that possible distortions in asset prices have become "a source of concern" and should be a "priority" for financial supervisors.

The Market Monitoring Group was set up in March to flag potential systemic risks to markets and government officials. Its first public statement after four meetings this year calls for countries to tighten up on regulation rather than raise interest rates.

To guard against unwarranted risk-taking, supervisors should consider short-term steps, including higher margin, collateral, and loan-to-value ratios, the group said.

Improved stress testing and other tools should also be considered.

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