The world’s most powerful economies need to implement banking reforms quickly to eliminate uncertainty for institutions recovering from the ravages of the financial meltdown, Finance Minister Jim Flaherty said yesterday.
“We shouldn’t be distracted by bank levies and those kinds of issues, which don’t cut to the chase and the chase is decreasing the likelihood of reckless risk-taking, which we saw a couple of years ago,” Flaherty told reporters yesterday before a speech in Toronto, a day after officials agreed a global bank tax is not the way to fix the problem.
A report by the Conference Board of Canada, released yesterday, backed up Flaherty’s position, arguing that global leaders haven’t acted quickly enough to follow through on calls for financial reform.
Countries around the world have been working to come up with a new set of international regulations to prevent a repeat of the financial meltdown.
One proposal that has been floated is a bank tax that would be used to protect large financial institutions from failure in the future. The tax is favoured by several large European countries and the United States, but Canada has been arguing that any bank tax would ultimately be passed down to consumers.
On the weekend, G20 finance ministers meeting in South Korea agreed that each country will be free to choose its own way to deal with the issue.
In Canada, Flaherty said he wants to implement a so-called “embedded contingent capital provision” — essentially a security that would convert into shares if the bank ever found itself in trouble, guaranteeing a source of capital that could be accessed as needed.