OTTAWA (Reuters) - The world has begun to implement only a small fraction of the reforms needed to make the global banking system safer, Bank of Canada Governor Mark Carney said, adding that the next target is “shadow banking.”
In an interview with CBC News Network to air on Thursday, Carney said the world was now safer than it was in 2007 and 2008 due to some changes already taken by various countries to strengthen their banks and avoid another financial meltdown.
“That’s a good thing. The question is the scale of our ambition,” Carney said, according to a transcript of the interview obtained by Reuters.
“Are we half way there in terms of implementation? No we’re not. We’re a quarter of the way there. So a lot more has to be implemented,” he said.
Carney, 46, is expected to become chairman next month of the Financial Stability Board, the G20’s task force responsible for crafting and implementing global financial regulatory reforms.
He said a priority is to start regulating the $60 trillion shadow banking sector, which includes non-bank financial entities such as money market funds and securities lending, to make sure that risky behavior previously taken on by banks is not pushed into that unregulated sphere.
“A lot of good things happen in the shadow banking sector, but a lot of risk can come out of it that has to be tackled, and that’s what we’re here to work on,” Carney said.
“If it looks like a bank, acts like a bank, then it should have the same kind of regulatory standards as a bank.”
The other priority areas for reform he named were implementation everywhere of Basel III capital standards and a new approach to supervision, akin to the one used in Canada.
Reporting by Louise Egan; editing by Rob Wilson