Mark Carney Fires back at Bankers
Mark Carney is firing back at Canadian bankers for requesting a pause on global financial reforms aimed at averting a repeat of the 2008 global crisis.
The Bank of Canada governor said in an interview with The Canadian Press that reforms should continue until the structural changes needed to eliminate irresponsible risk-taking are completed.
And he dismissed concerns voiced by Canadians Bankers Association head Terry Campbell who cited “unintended consequences” Tuesday when he said no one knows what impact the comprehensive reforms would have on the system.
Campbell called for a “pause” on future reforms until the financial system has had time to do stock-taking.
Carney, who has fought resistance to reforms from the U.S. banking community, appeared to have no patience with even mild concerns from Canada’s banking sector.
“No one pressed pause in the middle of the financial crisis when $4 trillion were lost and 28 million jobs were lost, 400,000 here in Canada,” he said.
“It was a good thing we didn’t press pause when we provided over $30 billion of liquidity to the Canadian banking system. It was a good thing the government of Canada didn’t press pause when it provided … very timely and effective term liquidity to the Canadian banking system.”
While the banking sector often boasts that no Canadian financial institution needed to be bailed out, Ottawa purchased tens of billions of dollars of mortgages from banks in an effort to free up cash to keep credit markets active. As well, the central bank cut its overnight rate to 0.25 per cent, a record low and also provided extraordinary asset swaps.
Carney said although the crisis emanated from outside Canada’s borders, the repercussions were also felt in Canadian money markets.
“Canadian fixed income markets, the Repo markets, the core funding markets seized up during the crisis, and that’s not acceptable. It’s not an acceptable state of business,” he said.
Taxpayer funds in the U.S. and in parts of Europe were used to shore up so-called too-big-to-fail banks. That must never happen again, Carney said.
“This is a capitalist system, that’s not the right way to run things. That requires a series of structural changes in order to ensure that there are no institutions globally, domestically, that are too big too fail and I see no reason to pause on a very deliberate process to ensure that is the case.”
Most analysts blame the financial crisis, triggered by the collapse of the Lehman Brothers investment bank, with causing the Great Recession of 2008-2009 and leaving a legacy of crippled economies and slow growth still plaguing the advanced world today.
Carney said new capital requirements being demanded brings global financial institutions up to pre-existing Canadian standards, but said even Canadians banks need to beef up their reserves under the latest rules.
As head of the Swiss-based Financial Stability Board, the bank governor is responsible for monitoring the implementation of the reforms. But Carney was a vocal spokesperson for reform even before being named to the board last fall.
His clash last September with Jamie Dimon, head of JP Morgan Chase & Co., at a closed-door meeting in Washington over the regulation push has become the stuff of lore in financial circles. A few days later, Carney gave a speech in Washington warning about “backsliding” from some quarters.
Carney said he does not believe there will be unintended consequences from the changes, adding that he has yet to see any examples.
“I think it’s very clear what we’re looking to do … to build a more resilient financial system, that means more capital, better liquidity management,” he said.
“The (reform) pieces fit together.”
The Canadian Press