TORONTO, Dec. 13, 2012 /CNW/ - Ottawa must move carefully in deciding
the best role for the Bank of Canada in preventing threats to financial
stability, according to a report released today by the C.D. Howe
Institute. In "Seeking Financial Stability: The Best Role for the Bank
of Canada," former Bank of Canada Governor John Crow assesses how much
of a role the Bank should play in this new policy front.
Since the 2008/09 financial crisis, notes Crow, each G-20 country has
had a responsibility to re-examine its regulatory and supervisory
processes and establish a clear and focussed policy framework for
preventing threats to financial stability. Some countries have seen the
establishment of new structures, such as the US Financial Stability
Oversight Council, and the allocation of new responsibilities for
Crow's focus is on the best role for the Bank of Canada in light of its
monetary responsibilities. He emphasizes that through a record of
consistent achievement over many years, the Bank has established a
remarkable general understanding and acceptance of its monetary policy
framework - one centered on sustained low, and therefore stable,
inflation as a national financial anchor.
The author concludes there is no particular virtue in adding to the
Bank's responsibilities further, and quite distinct, policies that will
stretch that credibility. "Given the high value of what the Bank is
already responsible for, it should be particularly hesitant about
taking on new responsibilities on such a broad, and as yet extremely
ill-defined, policy front," he says.
Financial stability is an area where the likely policy tools are
markedly different from those normally involved in monetary policy,
notes Crow. Also, given a longstanding continuing federal financial
regulatory establishment, the channels of responsibility and authority
for those tools promise to be somewhat diffuse.
When it comes to the central bank, focussing on its ability to deliver
on its clearly assigned monetary policy mandate comes first.
For the report go to: http://www.cdhowe.org/seeking-financial-stability-the-best-role-for-the-bank-of-canada/19937
SOURCE: C.D. Howe Institute
For further information:
contact: John Crow, former Governor of the Bank of Canada (1987-1994); or Philippe Bergevin, Senior Policy Analyst, C.D. Howe Institute, 416-865-1904, email: firstname.lastname@example.org.