–‘Highly Confident’ Fear Of Collapse Of Major Lenders Removed
–‘The World Is Much Bigger Than The Banking Industry’

By Courtney Tower

OTTAWA (MNI) – Europe’s late-night decisions Thursday on Greek debt
and an expanded bailout fund for weakened banks mean that for the world
“the worst-case scenario has been removed,” Bank Of Canada Governor Mark
Carney said Thursday night.

The worst result of Europe inadequately dealing with its debt and
banking crises and with the immediate Greece situation would have been
the collapse of huge banking institutions just as Lehman Brothers
collapsed in the United States and other huge U.S. lenders had to be
bailed out, Carney said in a national television interview.

European banks would not any longer be caught in the funding
squeeze that Lehman faced and which required other huge U.S.
institutions to be taken over by others with federal government
assistance, Carney told Canadian Broadcasting Corporation interviewer
Amanda Lang.

Carney said he was “highly confident” that Europe and the global
financial system have escaped that scenario. He also was “highly
confident that there will be concrete steps” taken by Europe to flesh
out the general decisions taken, on expanding the bailout fund for
European banks to $1.4 trillion, requiring banks to have higher capital
reserves, and getting banks’ agreement to take a 50% loss on their Greek
loans.

Carney was, on the other hand, just “fairly confident” that Europe
would then go on to the necessary next steps that Canada and others have
been calling for. These include a fundamental restructuring of the
European Union to reduce the sovereignty of member nations somewhat to
give regulatory powers to the European Financial Stability Facility, for
which Carney foresaw political difficulties.

Interviewer Lang noted that Carney is being touted as the next head
of the Financial Stability Board (FSB) of the G-20 nations, to which he
did not demur, and said he would become, for the financial system, “the
policeman of the world.”

In Cannes, at the end of next week, Carney replied, G-20 leaders
will set an agenda for the FSB, and part of that agenda will be “a
policeman-type role.” The other part would be “designing rules and
approaches for shadow banking for (regulating) derivatives.”

Was Carney ready to “take on” the huge banks that oppose tighter
rules? Carney was asked.

The great financial institutions are important and do good work, he
answered, but “it’s the (financial) system as a whole that has to work,”
and it has to work for the real economy, and not for its’ own end.”

“The world is much bigger than the banking industry,” Carney said.

** Market News International Ottawa **

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