London - Bank of England Governor Mark Carney dismissed banks' concerns about new capital requirement proposals and said they have to stop refusing to follow new international rules, in an interview published on Monday in the Sydney Morning Herald.
Carney rejected claims by banks that proposed standards being discussed by G20 members in Sydney were so strict that they could lead to an explosion in shadow banking and sow the seeds of the next crisis.
“Banks went into the financial crisis carrying de minimis levels of capital - for example, less than 2 percentage points relative to their risk-weighted assets, let alone their actual assets. They carried basically no liquidity protection and they were reliant on the state to insure,” he told a reporter for Fairfax Media on the sidelines of the Sydney G20 meetings.
“The consequence was that we had a crisis where even countries that did the right thing in advance, such as my native Canada and here in Australia, had to take extraordinary measures to support the banks,” Carney said.
He also said that Britain has made it through the easy phase of guidance.
“Now it becomes a question of what will we do and how and under what criteria as the economy continues to recover,” Carney said defending his forward guidance policy on interest rates. - Reuters