Too-big-to-fail bank problem may still exist, says FSB head

OTTAWA Thu Nov 8, 2012 6:02pm GMT

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OTTAWA (Reuters) - Some investors still seem to think governments will save failing large banks despite new rules designed to allow troubled institutions to collapse without taxpayer bailouts, the head of the G20's Financial Stability Board said on Thursday.

Mark Carney, who is also Governor of the Bank of Canada, said the FSB had made progress in implementing reforms to ensure no bank was considered "too big to fail", but that more work may need to be done.

"It is not clear yet that too-big-to-fail has been ended. For example, credit-rating agencies continue to boost their ratings of major banks by a factor that recognizes implied government support," Carney said in the prepared remarks for a speech in Montreal.

"Despite the proclamations of G20 leaders, investors seem to think governments will once again blink when faced with a failing large bank," he said, adding this might "underscore the need for further measures".

Carney made no mention of domestic monetary policy or the Canadian dollar in his speech.

(Reporting by Louise Egan and David Ljunggren; Editing by David Ljunggren)

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