Former Bank Of Canada Deputy Governor Urges Local Banks Not To Be Complacent

June 25, 2009 12:57 p.m. EST

Ottawa, Ontario (AHN) - The former deputy governor of the Bank of Canada has warned local banks of complacency, while the chairman and chief executive of the Bank of New York Mellon forecasts Canadian banks will lose their global competitive edge in the next 12 to 18 months.

Former Bank of Canada deputy governor Sheryl Kennedy identified becoming overconfident that Canada was not hit as hard as other western nations as Canada's biggest risk today.

Kennedy said, quoted by the Financial Post, "We need to learn the lessons and enhance our risk management."

She explained the ability of Canadian banks to avoid the worst of the global financial crisis to its risk-averse culture and tougher laws. Kennedy, who joined consulting firm Promontory Financial Group Canada in January as special adviser to the chairman, warned Canadian banks because of their very high ratio of Tier 1 capital, are in a good position to take advantage of opportunities that emerged from the crisis. However, those opportunities may be gone if the banks fail to act.

In a forum in Canada on Wednesday, Bank of New York Mellon chairman and chief executive Robert Kelly warned that Canada's competitive advantage may only last 12 to 18 months.

He traced the Canadian banks' advantage to its conservative banking culture, while in contrast America's banking system was hobbled by the mortgage market crisis, security markets that went out of control and its lack of a mature and well-managed financial system.

Kelly added that the regulatory reform package being pushed by U.S. President Barack Obama is good, but may not be sufficient to consolidate the number of regulators and players in the American banking industry.