Is Mark Carney on the Right Track?

When Bank of Canada Governor Mark Carney was named the Chairman of the International Financial Stability Board (FSB) back in November, I assume he wasn’t expecting the kind of attention he has received in such a short amount of time. Two weeks ago at an official FSB meeting in Basel, Switzerland, Carney, successor to Italy’s Mario Draghi, was met with questions regarding Philipp Hildebrand; a long-time friend and former second in command at the 24-nation-member-strong FSB. Hildebrand recently lost his positions as Chairman of the Swiss National Bank and Vice-Chairman of the FSB following an insider trading scandal that involved his wife Kashya Hildebrand. In a Globe and Mail article G24 (Group of 24) Secretariat head Amar Bhattacharya and former US Treasury Department official Edwin Truman appeared to express doubt about Carney’s ability to run both the FSB and the Bank of Canada. This is because Carney would be responsible for setting the fiscal policy for both institutions without the help of a Vice-Chairman at the FSB as Carney will reportedly not replace Hildebrand. Back in November when Carney was named head of the FSB at a meeting in Cannes, it stands to reason that the other 23 nations involved found security in naming a central banker who ran the world’s soundest banking system. A 2008 survey by the World Economic Forum named Canada ahead of Sweden, Luxembourg and Australia as the healthiest banking system in the world.  This is not to say that Canada is not being affected by the global recession as the country is experiencing levels of unemployment up to 7.5% as of two weeks ago. And under Carney’s careful direction The Bank of Canada is not expected to change domestic interest rate policy continually sighting that Canadians have too much debt on the balance sheet. Despite this Canada is starting to shine on the world stage as an example of what sound management can achieve. Carney, who was named one of Time magazine’s 100 most influential people in 2010, is said to have the support of other Canadian financial leaders at the FSB, Tiff Macklem (Bank of Canada Senior Deputy Governor) and Julie Dickson (Canada’s Superintendent of Financial Institutions) and is looking at making changes. Carney says the FSB, “is also considering tougher regulatory treatment for the ‘shadow’ banking system, which includes money-market funds, credit hedge funds, special investment vehicles and government-sponsored mortgage companies such as Fannie Mae and Freddie Mac in the United States,” the Globe and Mail reports. Furthermore, the US Federal Reserve has recently said that it will adopt Carney’s tougher banking rules outlined in the “Basel III” structure despite reportedly being seen as anti-American. No doubt Mr. Carney will have his work cut out for him over the coming months. We have all put our trust in to the hands of the FSB, a group of bankers who meet quarterly whose decisions direct our fate. Let’s make this a topic to keep an eye on. We wouldn’t want to stand by and watch as the FSB made the wrong choices. | Raymond Matt, CFP, CLU, TEP, CHS | The Ontarian, Writer, Editor

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