Bloomberg News

FSB Favorite Carney May Not Have to Label Canada Banks Systemic

October 17, 2011

Bank of Canada Governor Mark Carney emerged from a meeting of Group of 20 officials in Paris as the leading candidate to oversee efforts to rewrite new rules for international finance that some lenders claim may slow lending and hurt growth.

Carney is favored to take the helm of the Financial Stability Board, the body charged by the G-20 to make recommendations for global financial reform and monitor progress. He would replace Bank of Italy Governor Mario Draghi, who becomes president of the European Central Bank next month, according to two officials attending G-20 meetings in Paris on Oct. 14 and Oct. 15, who spoke on condition of anonymity because a decision hasn’t been made.

If chosen, Carney would oversee new rules that would address risks associated with so-called “systemically important” banks, none of which are likely to be Canadian. Group of 20 governments are considering naming as many as 50 banks as systemically important to the global economy and in need of extra capital, two officials from G-20 nations said. Finance Minister Jim Flaherty said on the weekend he doesn’t expect any of Canada’s banks to be on the list.

Carney is “a highly qualified candidate,” Flaherty told reporters at a press conference in Paris, where G-20 officials agreed to strengthen the regulator’s capacity and resources. He said the FSB appointment will be announced at a summit of leaders from the G-20 in Cannes, France, on Nov. 3-4.

Clash With Lenders

Regulators have clashed with lenders including HSBC Holdings Plc (HSBA), BNP Paribas SA (BNP) and Citigroup Inc. (C:US) over the plans, with banks warning that the measures may constrain lending and hurt the economy. Jamie Dimon, chief executive officer of JPMorgan Chase & Co. has said that the U.S. should consider withdrawing from the Basel committee and that the rules it sets are “anti-American.”

Carney, 46, worked at Goldman Sachs Group Inc. for more than a decade before becoming a policy maker in 2003 and then chief of Canada’s central bank in 2008. He has pushed for tougher regulations for global lenders and clashed with banking executives over new rules requiring them to hold more capital.

In a Sept. 25 speech to a banking group in Washington, Carney said new financial-market regulations wouldn’t hobble the global economic recovery, citing the recent UBS AG (UBSN) trading loss of $2.3 billion as an example of why greater controls are needed.

Monetary Policy

If appointed, Carney would likely continue to run monetary policy in Canada, the world’s 10th largest economy. Like other central bankers, he has spent the last three years seeking to bolster growth by keeping interest rates at historically low levels.

Speaking in an interview with CBC Television recorded Oct. 13 and broadcast over the weekend, Carney said he has room to add stimulus by lowering the central bank’s benchmark interest rate from the current 1 percent, and could boost the economy further if needed should lower rates be insufficient.

“We are not out of bullets when we get to that point, but we’re not trigger happy either,” Carney said. “The current level of interest rates are appropriate, but we’ll judge that as the economy evolves.”

Carney helps to oversee a Canadian financial system that largely escaped the last financial crisis and has been ranked the world’s soundest by the Geneva-based World Economic Forum. The country’s three largest banks -- Royal Bank of Canada (RY), Toronto-Dominion Bank and Bank of Nova Scotia (BNS) -- are among the world’s 20 largest by market capitalization.

To contact the reporter on this story: Theophilos Argitis in Ottawa at

To contact the editor responsible for this story: David Scanlan at

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