Mark Carney has urged finance ministers of the G20 countries meeting today in Germany not to give into regulatory “reform fatigue”.
Mr Carney, chair of global standard-setter the Financial Stability Board, wrote in a letter published today that it was essential to complete the programme of overhauling financial regulations started in the wake of the crisis, urging the G20 to consider how to “reinforce” international cooperation.
“A decade after the start of the crisis, an element of reform fatigue is understandable. But giving into it would mean that essential standards are neither completed nor fully implemented,” reads the letter from Mr Carney, who is also governor of the Bank of England. “The net result will be less and more expensive financing for households and businesses, and very likely lower growth and higher risks in our economies.”
Those reforms have been led by the FSB, and the Basel Committee for Banking Supervision. Both grew in stature and influence during the crisis as countries tried to battle roiling markets and failing banks.
But both the UK’s decision to leave the European Union and the election of President Trump have prompted fears of a balkanisation of the international consensus around regulatory reform.
Mr Carney’s letter was published as G20 finance ministers meet in Baden-Baden in Germany. It will be the first time the new US Treasury secretary, Steven Mnuchin, meets his counterparts.
President Trump has already pledged to roll back parts of US regulations put in place since the crisis. Meanwhile, international talks at the Basel Committee to sign off a final set of reforms have stalled, partly because the Trump administration is yet to appoint a top bank supervisor.
Germany has also been critical about a particular set of reforms over concerns that they will disproportionately hit its biggest banks.
Both the FSB and the Basel Committee were also cited in a critical letter earlier this year to chair of the Federal Reserve, Janet Yellen, by Patrick McHenry, the vice chairman for the committee on financial services, as examples of “secretive” international fora whose reforms led to slower economic growth in the US.
Mr Carney’s letter countered:
The G20 has made substantial progress in building a financial system that is more resilient and better able to fund households and business in sustainable way. As the global recovery gains strength, now is not the time to risk these hard-won gains.