UPDATE 2-Bank of Canada warns against fragmentation of financial reforms

Mon Jun 8, 2015 6:38pm EDT
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(Adds remarks on context of possible higher U.S. rates; changes quotes to reflect actual delivery of speech)

MONTREAL, June 8 (Reuters) - International financial authorities must ensure that countries and other jurisdictions do not go too far down the road toward domestically oriented financial system reforms, Bank of Canada Senior Deputy Governor Carolyn Wilkins said on Monday.

"If ... every jurisdiction acts in their own national interest, defining that national interest very narrowly, everybody could be left worse off," she told a Montreal economic conference.

Calling for consistent application of international standards, she said: "If we fail to achieve this, we could end up with inconsistent and incomplete regulations that impede desirable flows and we can create scope for circumvention."

Wilkins also said that if multilateral agreements proved intractable, bilateral agreements could be another way to reach the same goal in light of the trend toward regional banking.

Addressing the prospect of the "normalization" of interest rates, meaning higher rates, which she said markets expect from the United States, she said that will provide a test of the international financial system.

But she encouraged her audience to consider the important context in which it would take place, that of a strengthening U.S. economy.

Her speech made no reference to current monetary policy or the economic outlook. (Reporting by Randall Palmer and Allison Lampert; Editing by Meredith Mazzilli and Alan Crosby)