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OTTAWA (Reuters) - Canada needs to jump on the global bandwagon in favour of tougher banking regulations, even though domestic institutions have kept their footing throughout the credit crisis, officials said on Wednesday.
Finance Minister Jim Flaherty plans to meet with top banking executives next week to urge them to adopt reforms endorsed by the G7, aimed at soothing the battered global credit market.
"We agreed in the G7 that we would move ahead with the Financial Stability Forum reforms and I want Canada to be on that page," Flaherty told reporters.
The Bank of Canada welcomed new regulations announced on Wednesday by the world's top banking watchdog, the Basel Committee on Banking Supervision, saying they were relevant to Canada.
Policy-makers from the world's seven most industrialized countries pledged over the weekend to implement a list of recommendations for ridding the international financial system of the flaws that led to the crisis.
The proposals were offered in a report by the Financial Stability Forum, which comprises central bankers and global regulators.
Within 100 days, they agreed to tell banks to reveal the extent of their losses and exposure to toxic assets like U.S. subprime mortgage-backed securities, using a template for valuing those assets that is included in the report.
When asked what his message to domestic banks would be, Flaherty said, "The importance of going ahead and using the leading practices that are prescribed now by the Financial Stability Forum. Our banks are pretty good in accomplishing that already, but we need to have uniformity."
On Wednesday, the Basel Committee signaled its intent to act on the FSF regulatory proposals. It spelled out changes designed to raise the cost for banks of complex investments and risky trading practices such as those that caused the latest global financial crisis.
The Bank of Canada praised the body for seeking to minimize the impact of the new measures on banks in the midst of a 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 said.
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.
Nevertheless, Harrison said the bank believes the new rules "are relevant to all countries, including Canada."
Commercial banks globally have largely chafed at the idea of heavy-handed rules on banking practices. In Canada, the banking lobby issued a reminder that there was little to "fix" here.
"It is important to remember that Canadian banks are well-capitalized compared to international standards. Canada's banks are also sophisticated risk managers," the Canadian Bankers' Association said.
Reporting by Louise Egan; editing by Rob Wilson