OTTAWA (Reuters) - The Bank of Canada said on Wednesday it welcomed new regulations by the world’s top bank regulator, especially because they would be introduced in a way that seeks to avoid affecting banks in the midst of the global credit crisis.
The Basel Committee on Banking Supervision spelled out new banking regulations on Wednesday designed to raise the cost of complex investments and risky trading practices such as those that caused the latest global financial crisis.
“The bank welcomes the committee’s intention to introduce these measures in a manner that promotes long-term bank resiliency and strong supervision, while seeking to avoid potentially adverse near-term impacts as the re-pricing of risk and deleveraging process continues in financial markets,” Bank of Canada spokesman Jeremy Harrison told Reuters.
Harrison said the announcement was consistent with the 65 proposals contained in a report commissioned by Group of Seven policy makers and endorsed by them on the weekend.
Bank of Canada Governor Mark Carney has praised the Canadian financial system for remaining well-capitalized compared with its U.S. and European counterparts throughout the global credit crisis. The trouble that began in the U.S. subprime mortgage market last August has spread to contaminate markets worldwide and now threatens the global economy.
In Canada, there have been some writedowns by banks and liquidity problems in money markets. But most of the trouble has been concentrated in one segment of the nonbank asset-backed commercial paper market, which remains frozen pending approval of a restructuring plan.
Nevertheless, the new regulations are equally relevant to domestic banks, the Bank of Canada said.
“The steps outlined in today’s announcement by the Basel Committee are relevant to all countries, including Canada,” Harrison said.
Reporting by Louise Egan; Editing by Peter Galloway