Message to G-20 Ministers - Look Before Leaping into New Financial Sector Regulation

TORONTO - G-20 ministers should avoid creating a new layer of regulation to counter future systemic financial risks, according to a newly released C.D Howe Institute study. The Commentary by Nick Le Pan, former Superintendent of Financial Institutions, cautions against current G-20 proposals to expand regulation to include system-wide macroeconomic risks. "Priority should be on improving the existing system from lessons learned, before we put all our energy into a new macro-prudential system," Le Pan said in the study, Look Before You Leap: A Skeptical View of Proposals to Meld Macro- and Microprudential Regulation.

Without more clarity on goals and responsibilities, adding responsibility for system-wide risk to the mandates of the Bank of Canada, the Superintendent of Financial Institutions (OSFI) and other regulators risks unproductive overlap and loss of focus, said Le Pan. Instead, he recommends that the finance minister should create a legislated financial stability committee, with the Bank of Canada, OSFI, and key securities regulators among the members. It should be separate from the existing, successful federal committee that deals with individual problems at banks and insurers. The finance ministry should coordinate the financial stability assessment process and chair the committee. That approach will build on our strengths, he concluded. For the study click here. http://www.cdhowe.org/pdf/commentary_296.pdf