Canada Enjoys Global Advantage From Financial Turmoil: BoC Governor

(The Canadian Press)

The Canadian economy may get shaken by turmoil gripping the United States, but the stronger financial system here may prove to be a global advantage, the country’s top central banker said Thursday.

Bank of Canada governor Mark Carney said loans by Canadian banks have remained surprisingly robust, while foreign banks have been forced to restrict their leverage.

“Canadian banks could modestly increase leverage by growing their lending relative to their current capital base and this flexibility give our economy a rare advantage,” Carney said in an afternoon speech.

The stronger financial position of Canadian banks means they can borrow on capital markets at considerably lower rates than their American counterparts, he said.

Carney said the cleansing nature of the “ferocious storm” and a decisive policy response from the U.S. government could mark the beginning of the end of the crisis that has gripped the global financial system for 14 months.

He said the “bold and timely” US$700-billion bailout of the U.S. financial sector could reduce lost output and employment in the United States and minimize the spillover to the rest of the world.

“Nonetheless, the months ahead will bring more financial losses, significant consolidation in the financial industry and further increases in the cost of capital. The eventual reordering of the financial system will be historic.” Read more here.