Much of the recovery so far has in any case been heavily reliant on "easy money" conditions fostered by central banks, indicating an eventual unwinding of excessive liquidity will become a destabilizing risk event, warned a global financial industry report Thursday.

The Institute of International Finance (IIF) said in its latest Capital Markets Monitor that quantitative easing (QE) and very low interest rates cannot last forever, but the risk is that financial markets have become addicted to them.

"The fact that the Dow Jones Industrial Average rose to a record high this week is more a reflection of these relaxed international monetary conditions than a signal of strong recovery in the 'real' economy," cautioned the report. "The longer central bank liquidity is relied on to hold things together, the more excesses and distortions are being accumulated in the financial system."

The report also identified four major uncertainties, including the difficulties posed by the hung parliament in Italy, following the country's recent elections; the ramification of the US " sequester" and the sharp division within the Federal Open Market Committee over whether or not to sustain QE3; Japan's efforts to overcome 15 years of deflation.

Central banks have committed themselves to do "whatever it takes" to stabilize financial markets and economies, but " political and policy uncertainties have intensified" in the last month, strengthening the headwinds against the nascent global economic recovery, the report concluded.

The IIF, which has more than 450 members in more than 70 countries and regions, began to monitor the capital market in March 2009 in the aftermath of the 2008-2009 financial crisis. The report aims to assess systematic risks, put forward suggestions to mitigate risks and contribute to enhancing financial stability.