3 Min Read
TORONTO (Reuters) - Efforts to reform the world financial system to prevent a crash like the one that helped trigger the 2008 recession are half complete, and the challenge now is not to lose the momentum, Bank of Canada Governor Mark Carney said on Sunday.
In an interview with Canada's Global TV, Carney, who also heads the international Financial Stability Board set up to fix financial systems, said it would take European countries months or years to rebuild their economies and financial systems.
"We made a lot of progress in building capital in the banks internationally, we made progress improving liquidity, we're making progress in making derivatives and other markets more resilient and safer," Carney said in the interview, which ran on Global's The West Block.
"I would say we're a little more than half way along this process of financial reform and this is really the tough bit because this is where, you know, momentum could flag."
The FSB is working with countries and banks to agree on reforms that will make the global financial system more transparent and prevent problems in the future, and Carney admitted the changes would hit bank profits - a possible reason for the pushback.
He said European countries would need sustained efforts to improve competitiveness, fix banks and balance budgets.
"It's not going to be measured in the course of weeks or weekends, it's going to be measured in the course of months and years," he said. "These are big sustained reforms that are going to be required. There is going to be political difficulties that are associated with that."
But Carney said he expected the main problems to be contained within Europe, and the near-term knock-on effect on Canada was likely to be limited.
Carney repeated his warnings that domestic interest rates were bound to rise from current record-low levels, with likely problems for those borrowing heavily to get into a still hot housing market.
"Interest rates eventually are going to rise so as you're taking on longer term debt, keep that in mind," he said.
"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. 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."
Canada escaped the housing price implosion seen in many U.S. markets, and while prices dipped during Canada's short-lived recession, they soon recovered to well above pre-recession levels, fueled by mortgage rates that have occasionally edged just below 3 percent.
The government has already tightened rules at the Canada Mortgage and Housing Corp, which provides mortgage insurance, and Finance Minister Jim Flaherty said on Saturday that more changes were possible.
Reporting by Janet Guttsman; Editing by Maureen Bavdek