LONDON, ON, Feb. 25, 2013 /CNW/ - While much progress has been made
reforming the global financial system, to restore fully trust in
banking there remains a fundamental need for financial institutions to
rediscover their core values, Bank of Canada Governor Mark Carney said
today in a speech at Western University in London, Ontario.
The real economy relies on the financial system, and the financial
system depends on trust. The widespread loss of trust in banks has both
"deepened the cost of the crisis and is restraining the pace of the
recovery," said the Governor.
The costs of not restoring this trust are potentially enormous, since a
fragmented financial system could ultimately "reverse the process of
global economic integration that has supported growth and widespread
poverty reduction over the last two decades."
The G-20's comprehensive, global financial reform agenda goes a long way
to restoring that trust, but will not be sufficient.
"Virtue cannot be regulated. Even the strongest supervision cannot
guarantee good conduct. Essential will be the re-discovery of core
values, and ultimately this is a question of individual
responsibility," said the Governor.
The Governor outlined progress underway on the implementation of the
G-20's financial reforms, which include measures that will help rebuild
trust. New Basel III capital rules are being adopted, the reliance on
ratings agencies is diminishing, and market infrastructure is being
improved. As banks and their investors develop a better appreciation of
their prospects for risk and return, business models are changing, and
compensation practices are being reformed to more closely match rewards
with risk profiles.
However, a spate of conduct scandals has overshadowed these
improvements. This underscores the need for banks, regulators and other
stakeholders to rebuild trust through a combination of institutional
and individual initiatives.
Fundamentally, banks must reconnect with their ultimate clients in the
real economy and rebuild core values within their institutions.
Making this reconnection begins with boards and senior management who
need to define clearly the purpose of their organisations and promote a
culture of ethical business throughout them. "But a top down approach
is insufficient," concluded the Governor. "Employees need a sense of
broader purpose, grounded in strong connections to their clients and
their communities," and "bankers need to see themselves as custodians
of their institutions, improving them before passing them along to
SOURCE: Bank of Canada
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