OTTAWA — The Bank of Canada made a forceful argument for a new financial regulatory framework Wednesday, saying the asset-backed commercial paper crisis could have been averted had one been in place.
The central bank governor told a Senate committee that the country’s regulatory fiefdoms need a new mechanism to ensure individual financial watchdogs do not have blinders on that prevents them from seeing the bigger picture.
Carney said the central bank had warned years in advance about the risks involved with the $32-billion non-bank asset-backed commercial paper market, but its cautions were ignored.
“In one case, the issue was really the only serious capital market problem we have had in this crisis (and) had been identified by the bank some years in advance.”
The ABCP market was frozen for months, requiring a restructuring of the notes.
Carney’s argument for what he called a new “mechanism” that would require individual regulators to consider the wider implications of their actions came at the conclusion of a two-hour hearing with the Senate banking committee.
In other testimony, Carney said he believes there has been enough stimulus to take Canada out of recession later this year.
Carney described the economic conditions as uncertain, but expressed confidence that the billions of dollars in stimulus being advanced by Ottawa and the provinces, along with his own aggressive monetary actions, will work.