Fair value accounting may exacerbate problems in already delicate markets, the former governor of the Bank of England has warned.

As fears grow about the impact of new fair value rules in the US implemented today, Lord Edward George voiced fears about the reaction of the markets to fair value fluctuations.

'My worry is that people might react in an instinctive way to particular numbers and it could add to nervousness. And with all the debt that's in the market it could be tricky in this economy,' Lord George said.

He said having a common set of reporting standards, so the markets could work better, is in principle 'absolutely right', despite some people being less than enthusiastic about the change. But the outcome of applying fair values will produce great volatility, and 'that's a worry'.

'People shouldn't react to headline figures. The companies should explain why the figures change so users can respond in an informed and balanced way', he added.

'What's in my mind is that those that are using the accounts when they are produced should understand what's involved, as before fluctuations were smoothed out,' he said in an interview published in today's Accountancy Age.