OTTAWA (Reuters) - New banking regulations proposed by Washington to avoid bailouts in the future also reach into Canada in a way that could hurt the government bond market and hinder progress on global financial reform, top Canadian officials said on Monday.
In letters to their U.S. counterparts, Bank of Canada Governor Mark Carney and Finance Minister Jim Flaherty said the ban on proprietary trading by banks, known as the Volcker rule, would have unintended consequences for Canada.
These include limiting liquidity in the government debt market and hampering the ability of bank-sponsored mutual funds to provide services to their clients.
"The Volcker rule as drafted would also potentially apply to Canadian banks' much larger Canadian operations, which pose no risk to U.S. taxpayers or U.S. financial stability," Flaherty wrote in a letter to U.S. Treasury Secretary Timothy Geithner.
"The Volcker rule could apply to transactions between Canadian banks that are simply facilitated by U.S.-based financial infrastructure, such as U.S. clearing houses. This could have unintended adverse consequences for the U.S. financial system," he wrote.
The Volcker rule prohibits banks, which receive federal backstops such as deposit insurance, from trading for their own profit in securities, derivatives and certain other financial instruments.
It will also prohibit banks from having more than a minimal ownership interest in hedge funds or private equity firms.Both Carney and Flaherty had already expressed their concerns informally and the country's banking regulator sent formal comments to Washington on December 28.
Complaints are also pouring in from other countries. Last week the European commissioner in charge of financial regulation, Michel Barnier, raised concerns about the rule and Britain's George Osborne did the same earlier this month.
Carney, who is also chairman of the Group of 20 nations' Financial Stability Board, said the U.S. legislation as it now stands could reduce the resilience of the global financial system.
Carney proposed two amendments to the legislation on behalf of Canada in his letter to U.S. Federal Reserve Chairman Ben Bernanke.
One change would address a concern that Canadian banks would face restrictions for market-making and hedging activities even if they pose no risk to the U.S. financial system.
Secondly, it suggests that Canadian government securities be exempt from the ban on proprietary trading.
yahoo.com
In letters to their U.S. counterparts, Bank of Canada Governor Mark Carney and Finance Minister Jim Flaherty said the ban on proprietary trading by banks, known as the Volcker rule, would have unintended consequences for Canada.
These include limiting liquidity in the government debt market and hampering the ability of bank-sponsored mutual funds to provide services to their clients.
"The Volcker rule as drafted would also potentially apply to Canadian banks' much larger Canadian operations, which pose no risk to U.S. taxpayers or U.S. financial stability," Flaherty wrote in a letter to U.S. Treasury Secretary Timothy Geithner.
"The Volcker rule could apply to transactions between Canadian banks that are simply facilitated by U.S.-based financial infrastructure, such as U.S. clearing houses. This could have unintended adverse consequences for the U.S. financial system," he wrote.
The Volcker rule prohibits banks, which receive federal backstops such as deposit insurance, from trading for their own profit in securities, derivatives and certain other financial instruments.
It will also prohibit banks from having more than a minimal ownership interest in hedge funds or private equity firms.Both Carney and Flaherty had already expressed their concerns informally and the country's banking regulator sent formal comments to Washington on December 28.
Complaints are also pouring in from other countries. Last week the European commissioner in charge of financial regulation, Michel Barnier, raised concerns about the rule and Britain's George Osborne did the same earlier this month.
Carney, who is also chairman of the Group of 20 nations' Financial Stability Board, said the U.S. legislation as it now stands could reduce the resilience of the global financial system.
Carney proposed two amendments to the legislation on behalf of Canada in his letter to U.S. Federal Reserve Chairman Ben Bernanke.
One change would address a concern that Canadian banks would face restrictions for market-making and hedging activities even if they pose no risk to the U.S. financial system.
Secondly, it suggests that Canadian government securities be exempt from the ban on proprietary trading.
yahoo.com
No comments:
Post a Comment