UPDATE 1-Bank of Canada says economy no excuse to delay financial reforms

Tue Sep 24, 2013 3:12pm EDT
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* Bank of Canada official says "wrongheaded" to slow reforms

* Canada's mortgage securitization an area of potential risk

* Sees Canadian sector less risky than U.S. mortgage REITs

By Louise Egan

OTTAWA, Sept 24 (Reuters) - A senior Bank of Canada official urged global policymakers on Tuesday to push ahead with financial system reforms despite economic weakness, saying financial stability is an important precondition for growth.

"Some have argued that, given the weak recovery, now is not the time for the broad financial sector reform being promoted by the FSB (Financial Stability Board). That argument is wrong-headed," Lawrence Schembri said in his first speech since being appointed as a central bank deputy governor in February.

He said the FSB, operating under the direction of the Group of 20 leading economies, closely monitors the effects of new regulations for unintended consequences.

Canada's big banks emerged relatively unscathed from the global financial crisis, buoyed by strong capital ratios and conservative lending practices.

They are well ahead of their U.S. and European peers in complying with higher capital requirements under the Basel III global standards.   Continued...