Bank of Canada Governor Mark Carney said global regulators must overcome resistance from financial institutions to new rules that may reduce trading profits as they also guard against another credit crunch.
Carney, who is also chairman of the Financial Stability Board, made the comment during an interview on “The West Block with Tom Clark” on Global Television today.
“We’re a little more than halfway along this process of financial reform and this is really the tough bit because this is where, you know, momentum could flag,” Carney said. “You get the pushback from the industry and so we have to maintain those efforts and we certainly can.”
Carney cited the Group of 20’s push to move derivatives trading through new clearinghouses as an example of conflict with bankers in the Global interview. The proposal would replace a less resilient system where individual banks have a larger role and markets seize up when they struggle, Carney said, citing the collapse of Lehman Brothers Holdings Inc.
“Every trade has to be registered, every trade has to be revealed,” Carney said in the Global interview. “It’s understandable, but it’s not in the greater good to give into that pushback.”
On Canada’s economy, Carney reiterated that the main risks include the spread of Europe’s debt crisis and high levels of domestic consumer debt.
“Europe is the biggest external risk,” Carney said. “It takes the other half of my time that I don’t spend on Canada; if it’s not derivatives and financial reform, it’s on working on European issues and we will evaluate and adjust policy if necessary.” European leaders have done enough to make sure their problems “should be contained” he said.
Carney also said that he will take global “risks” into account when setting interest rates and that his main consideration remains meeting the central bank’s 2 percent inflation target. The Bank of Canada’s key interest rate has been 1 percent since September 2010.
“As the expansion progresses, it may become appropriate to reduce some of that considerable monetary policy stimulus we have in place,” Carney said, reiterating comments he’s made over the last few weeks.
Canadian families must ensure they don’t take on debts that will become unaffordable when interest rates rise, Carney said in the Global interview.
“What we’re really concerned about on an individual basis is, it’s the people that come in at the end of the condo-boom if you will,” he said. “It’s the people who stretch for that last dollar to get the house, that they’re the ones who are the most impacted by this situation.”