Financial market regulators are not prepared to deal with crises and must improve their contingency planning at a time when hedge funds and private equity firms are posing growing risks to the economy, warns a new report by finance ministries in the European Union.

The report, which will be discussed by finance ministers and central bankers at a meeting tomorrow, calls for national watchdogs to conduct more crisis simulation exercises and asks finance ministers to endorse calls for greater co-operation and preparation, Bloomberg reports.