Global Financial Strategy - Carney: The FSB's outspoken new chair

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Carney: The FSB’s outspoken new chair

Monday 7 November 2011 – by Karina Whalley

Forty-six year-old Carney is the youngest central bank chief of any of the G20 countries but the highly-vocal new chairman has a reputation for locking horns with both global regulators and banking chiefs.

Mark Carney has taken the helm of the Financial Stability Board becoming chairman on 4 November. The Bank of Canada governor was named as successor to Mario Draghi for a minimum three-year appointment.

A staunch supporter of the Basel III regulations, Carney has thrown his support behind the controversial countercyclical buffers. Having successfully pushed for a ‘Canadian approach’ to be adopted by the Basel Committee on Banking Supervision, he has since argued that the implementation of a buffer could increase the net benefits of reforms by as much as 20 per cent.

Carney derided a study showing GDP output would decrease due to new regulations, saying that the Bank of Canada’s calculations predict that Basel III reforms will make the world economy around $13tn (€9.7tn) because of the reduced risk of bank failures.

“In short, while the worsening global economic outlook has implications for bank performance, it does not provide a rationale for delaying the implementation of Basel III,” he said at a conference in September this year.

Carney told the audience that the G20’s move to boost capital requirements by adopting regulations such as the Basel III accord will ultimately provide a path to a more resilient system and an end to government support.

Related articles:

Carney beats Hildebrand to head FSB

Carney set for FSB chairmanship – reports

Carn he do it? Yes he Carn!

Draghi successor to be revealed at G20

Canada’s Carney attacks Basel III critics

JP Morgan chief Jamie Dimon lambasted the additional capital requirements being forced upon worldwide banks which ended in a now infamous clash with Carney during a closed doors discussion. The new FSB chairman has shown he is not intimidated by bank chiefs fighting against the need for reform.

However, he has equally taken a stand against global regulators on policies with which he does not agree. At the G20 Summit in Toronto last year, Carney was crucial in leading the opposition against a global-wide introduction of a financial transaction tax, which he has labelled a “distraction” from more pressing issues regarding capital and liquidity reforms and the world economic recovery.

Carney has also used speeches to call for bail-in and contingent capital mechanisms to be adopted globally as a solution to too big to fail, and for maximum G20 cooperation as countries, including Canada, set about developing domestic counterparty systems to regulate the over-the-counter derivatives markets.

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