Carney warns of risk from ‘reform fatigue’
ECONOMY Says banking overhaul key to global growth
• Global growth would suffer if regulators give into “reform fatigue” and fail to complete the overhaul of the world’s banking system triggered by the financial crisis, Financial Stability Board chairman Mark Carney said on Monday.
The FSB co- ordinates financial regulations for the Group of 20 countries (G20) whose leaders meet in Germany this week. The FSB was formed during the crisis that began in 2007 but after an intensive decade of making rules some policy- makers now want to prioritize growth over banking regulation.
U. S. President Donald Trump has said regulation is holding back lending and the U. S. Treasury has recommended delaying two measures that strengthen bank funding and require lenders to hold more capital for the securities on their trading books.
Carney, who is also the governor of the Bank of England, said in a letter to G20 leaders that there had been “immense progress” since the crisis in making banks safer, but nascent risks remained that needed to be addressed.
“In particular, giving into reform fatigue could erode the willingness of G20 members to rely on each other’s systems and i nstitutions and, in the process, fragment pools of funding and liquidity,” Carney said.
He said that would mean “less and more expensive” financing for households and businesses, and lower economic growth would be “very likely.”
Working together through reinforced, voluntary international regulatory co-operation based on agreed global rules would help to avoid this, said Carney.
The FSB has sought to keep members on board by reviewing new regulations and their impact. Carney said the review showed that higher resilience in the financial system has been achieved, “without impeding the supply of credit to the economy.”
Besides Washington’s misgivings about some reforms, regulators on the Basel Committee are also facing difficulties completing Basel III, a set of tougher capital rules for lenders worldwide.