The Bank of Canada shouldn’t be given broader powers to protect financial stability because that may weaken its current mandate, former Bank of Canada Governor John Crow said.
“The Bank is well off being an important adviser and protecting its integrity over monetary policy,” Crow, who led the Ottawa-based bank from 1987 to 1994, said in a telephone interview today after publishing a paper for the C.D. Howe Institute of Toronto, a non-partisan research group.
The central bank already contributes to stability with advice to government and its main mandate of setting interest rates to meet a 2 percent inflation target, Crow said. New powers shared with regulators such as Finance Minister Jim Flaherty or Julie Dickson of the Office of the Superintendent of Financial Institutions could make responsibilities unclear, which “would not be helpful,” he said.
Current Governor Mark Carney takes over the top job at the Bank of England next year, as that institution is poised to add broad powers over financial stability and bank regulation. The U.K. financial system has been damaged by bank bailouts and allegations that benchmark London interbank offered rates were manipulated, while Canada’s banking system has been ranked the world’s soundest by the World Economic Forum for five straight years.
The success of Canada’s regulations boosts the case for avoiding major changes at its central bank, Crow said.
“We do have a kind of regulatory framework that seems to have, to date, delivered,” he said.
The U.K. Financial Services Authority “lost its way,” Crow said. “I don’t think you can say that OSFI lost its way.”