Markets are nervous about countries that do not have a handle on their fiscal deficit and funding strategies, Howard Davies, director of the London School of Economics (LSE), told an Egyptian audience Sunday evening.

"There is worry about sovereign debt problem," said Davies at the first annual lecture of the Egyptian Financial Supervisory Authority (EFSA). He suggested that one "be sure with a clear message to the market on your fiscal position and that it does not spiral beyond control." The lecture, held at the American University in Cairo, marks the official inauguration of EFSA's Egyptian Financial Institute.

Davies, a former deputy governor in the Bank of England and a special adviser to the Chancellor of the Exchequer, delivered a talk on the topic of "Regulating the Financial Markets: lessons, challenges and prospects in the aftermath of the world crisis."

The LSE director lamented the fact that there is no central global regulatory authority with the power to deliver. Furthermore, he said the European Union lacks adequate structure for regulating a single financial market.

According to Davies, there ought to be a supranational institution in Europe that will stand behind countries that are unable to borrow from the market, in addition to a European entity set up to deal with banks operating on the pan-European level. He pointed out that there is no consensus on the new relationship between regulators and markets and there are signs that the response to the crisis may produce a new disequilibrium with too large a role for the states.

Davies also advised shareholders to play a bigger role in the governance of their companies.

EFSA was established in the summer of 2009, bringing together what were formerly the Capital Market Authority, the Mortgage Finance Authority and the Insurance Supervisory Authority.