The G-20's financial reform will raise the cost of funds but the overall benefits are much greater, the second-highest ranking official at Canada's central bank said Monday during a visit to Brazil.
Tiff Macklem, the senior deputy governor of the Bank of Canada, acknowledged that higher capital and liquidity standards will raise the cost of funds.
"But the benefits of reducing the frequency and severity of crises are much larger," Macklem said in the text of a speech posted on the bank's website.
He said analysis by the Bank of Canada suggests that stronger international liquidity standards and a two-percentage point increase in bank capital ratios globally would generate net gains to Canada in present value term of about 13% of gross domestic product, equivalent to about C$200 billion. The cumulative gain for the world economy would be more than 35% of global GDP, he said.
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