:00:13. > :00:17.be here at six. Now on BBC News financial
:00:18. > :00:22.financial centre has been tarnished again. This time another British
:00:22. > :00:27.bank, Standard Chartered, stand accused of irregularities will stop
:00:28. > :00:32.New York's top financial regulator claims the bank carried out $250
:00:32. > :00:37.billion of illegal transactions with Iran over the last decade. The
:00:37. > :00:41.Bight refutes these claims. The latest case follows that like other
:00:41. > :00:48.scandals in London. Moves are underway to tighten banking
:00:48. > :00:53.regulation. Where does this problem like? We speak to date with Mark
:00:53. > :00:57.Carney, in charge of steering the new rules will banking as chairman
:00:57. > :01:07.of the Financial stability Board for the G20 Leading economies. He
:01:07. > :01:30.
:01:30. > :01:38.is the governor of Canada's Central Welcome. He it's a pleasure. He is
:01:38. > :01:42.the reputation of London shock? it's not shock. It has taken some
:01:42. > :01:47.hits there is no question. It's important to distinguish these
:01:47. > :01:52.events and what's being done in into being used. The UK government
:01:52. > :01:56.and regulators is at the forefront of implementing and used it of
:01:56. > :02:03.regulations will does on these. They were putting these in place.
:02:03. > :02:06.Part of what we see is the aftermath of a dark period in
:02:06. > :02:15.London's financial history. looking at the allegations around
:02:15. > :02:21.Standard Chartered, walk about transactions with Iran, taking
:02:21. > :02:25.place over last Ten News, the financial scandal happen in 2008.
:02:25. > :02:30.Why does these things to carry on her that you were on bills?,
:02:30. > :02:34.ultimately that's the question for the institution and the American
:02:34. > :02:39.regulators that's money these allegations as yet unproven. The
:02:39. > :02:45.other point is that all institutions had to tonight and
:02:45. > :02:50.their awareness of what's happening. These are complex banks. They do
:02:50. > :02:57.with a range of countries and transactions. Executives need to be
:02:57. > :03:02.on top of that. APEC cannot be on top of that money to Should beer
:03:02. > :03:07.business activities. Look at pictures BC being fined for money
:03:07. > :03:17.laundering to Mexico and Barclays Bank be cause of the rigging the
:03:17. > :03:19.
:03:19. > :03:24.LIBOR. We rode traders at JP Morgan Chase. We have obviously these
:03:24. > :03:29.things need to be investigated. Standard Chartered has refuted
:03:29. > :03:36.these clubs. There are others in the UK like the Labour MP in House
:03:36. > :03:41.of Commons who suspects this is Washington trying to win at a
:03:41. > :03:44.commercial battle trying to change the trade from London to New York.
:03:44. > :03:51.Do you think they're trying to exploit these scandals? What's
:03:51. > :03:56.important is that all, two centres, Major, ninja and cinders, small of
:03:57. > :04:01.phonic centres such as Canada or other countries, they need to have
:04:01. > :04:07.confidence in each other. That confidence comes from implementing
:04:07. > :04:12.reforms. Minute to fix the problems in its current action and be open
:04:12. > :04:17.with each other and one thing we are doing in the Financial
:04:17. > :04:23.Stability Board is just designing the rules but also auditing and
:04:23. > :04:27.trees will be UK it cannot touch. We see what the current momentum
:04:27. > :04:31.these rules and its patent, we go to the top, the meat is the G-20,
:04:31. > :04:38.the media and the general public and we will let you know who is on
:04:38. > :04:43.track and who is behind. You're the chairman of the Financial Stability
:04:43. > :04:46.Board the G-20. That was set up to bring up her rib youthful
:04:47. > :04:50.resistance across the G20 and co- ordinate action on an international
:04:50. > :04:58.level will stop we're seeing some backsliding. Will you no aim no
:04:58. > :05:05.Aymes? That's interesting the stock or reforms that had been done on
:05:05. > :05:10.the capital to increase the at the banks called rorted to Ian Cohen
:05:10. > :05:14.score so at the robust, they make a small mistake but one problem in
:05:14. > :05:19.this crisis about the links is that it in the use of capital and make
:05:19. > :05:23.some big mistake and it quickly went bust and interest at the tax
:05:23. > :05:28.pays at to bail them would stop and stare it has been to say to these
:05:28. > :05:31.games and you need a lot more capital will stop it and at to be
:05:31. > :05:38.about seven times more than that have held previously. That's
:05:38. > :05:43.capital. We put that rude in place and everybody agreed. Winup Ward at
:05:43. > :05:51.is to insure the rules are exactly what is required and we report on
:05:51. > :05:54.all of those institutions. When the EU report? We report in November
:05:54. > :05:59.and we tracked the major banks who has made to back in the world have
:05:59. > :06:05.increased the capital more than 20% already. There are no win it
:06:05. > :06:13.position in the next year but if they take profits after tax, they
:06:13. > :06:20.take proper its they will meet the new requirements. This is the
:06:20. > :06:24.agreement. UN the mentally the question is, you confident that we
:06:24. > :06:30.will not major phase of by mental institutions which the taxpayer
:06:30. > :06:35.needs to coming to bail them? At a huge cost, Mervyn King has said
:06:35. > :06:40.clearly that he does not want the banks to become a problem with
:06:40. > :06:44.public finances. He is right. I shoot at you stop everybody shiver
:06:45. > :06:50.at you stop this is a capitalist system. It institutions make
:06:50. > :06:55.mistakes they should be abrupt. Bond holders of those institutions.
:06:55. > :06:59.The capital alone has not sold at. All that the Aussies make it less
:06:59. > :07:04.likely to happen. What needs to change and what will change and
:07:04. > :07:14.once in place by this year in the UK and the US and Canada is a
:07:14. > :07:15.
:07:16. > :07:21.regime so that the authorities and bail them, the bondholders, meaning.
:07:21. > :07:30.Or are not one International Review to report parity? Regular Tory
:07:30. > :07:36.authority. We have agreements with my new owners. Widowed at one club
:07:36. > :07:41.will regulate. As a few reasons for that. It ultimately involves
:07:41. > :07:49.different legal systems hand bankruptcy codes between the UK and
:07:49. > :07:57.it and the US, secondly it requires questions of fiscal and budgetary.
:07:57. > :08:02.But Lee one issue is who is on top of these institutions? Has been
:08:02. > :08:07.filings warm the regulatory side but that brought that we could have
:08:07. > :08:12.one club will rip him at a sitting there. War I'm not international
:08:12. > :08:18.commercial laws? And it's different, international commercial laws and
:08:18. > :08:21.agreements as opposed to that. We could move towards much more
:08:21. > :08:28.regulation but that is distinct from actually adding one regulatory
:08:28. > :08:32.body. But you had the US authorities and at too much it
:08:32. > :08:38.looked much in London and another problem with the euro crisis
:08:39. > :08:43.meaning the opera is put pressure on banks retreat and the national
:08:43. > :08:47.borders because it is the euro break up. That spirit goes against
:08:47. > :08:52.international rectories is the new Speaker up. The two things. I agree
:08:52. > :08:59.on the first warning in turns of the dispute between the regulatory
:08:59. > :09:04.bodies and its want in that the organisations such as the owners
:09:04. > :09:08.can provide objective perspective is using as discussions to broker
:09:08. > :09:13.those but about Europe, incredibly important, that's what's happening.
:09:13. > :09:18.National regulators are encouraging institutions to put victims will to
:09:18. > :09:22.the detriment of a hobby European financial system. I mean the market
:09:22. > :09:29.related to that monetary systems. The solution there within the
:09:29. > :09:33.Common Monetary Unit under the legal system is going to bids it a
:09:33. > :09:41.single European regular it. Bat under the jurisdiction of the
:09:41. > :09:45.Central Bank. We'll also owes the wheat Europe pressure on banks to
:09:45. > :09:50.increase cross-border lending. You see a decline of print for us from
:09:50. > :09:57.the north to the sound of which is jeopardising recovery. That's the
:09:57. > :10:02.European problem and something that is a concern was at its is a huge
:10:02. > :10:06.concern. It is his protectionism? It a form of protectionism but the
:10:06. > :10:13.monetary union was built up on not against on foundation. There was no
:10:13. > :10:17.common brick you later. He was no physical relationships between
:10:17. > :10:20.these countries and not enough labour market within the monetary
:10:20. > :10:26.and it's the colt will regions as opposed legal reasons and all
:10:26. > :10:36.others actors make that single monetary unit less robust than of
:10:36. > :10:38.
:10:38. > :10:44.the US. There are no close fiscal integration. It would be odd to
:10:44. > :10:52.have won with appear. You use it in Canada that you risen crisis is the
:10:52. > :10:58.number one problem for you. When you act look at its to do so all
:10:58. > :11:01.the officers, what do you think was you have confidence? Is two degrees
:11:02. > :11:08.of dealing with the European crisis. The minimum wage is that the crisis
:11:08. > :11:11.is contained. There is adequate firewalls put in place so that
:11:11. > :11:17.Europe and address the deep underlying problems over the course
:11:17. > :11:22.of a few years and this will take used to rebuild. It's not just
:11:22. > :11:27.building up political institutions which are essential but at its use
:11:27. > :11:31.and constitutional issues but to it just underlines structures have
:11:31. > :11:36.been a Commons, the Spanish economy needs to be more competitive in
:11:36. > :11:43.comparison to Germany. Putting fiscal houses and will go. This
:11:43. > :11:53.will take years. What we look for his wall put in place and a
:11:53. > :11:56.
:11:56. > :12:02.combination of the European binges. Midges I. E I'm and needs to buy
:12:02. > :12:10.time for these adjustments. Use a bit I am. Can the's position is
:12:10. > :12:20.that you will not be more money to I am careful pilots to euros.
:12:20. > :12:22.
:12:23. > :12:28.Government him. The at spinner. It's not just a bottomless pit.
:12:28. > :12:31.own more but there are many. The position of her government and is
:12:31. > :12:37.it he's mourning into Europe it should be under the terms, and yet
:12:37. > :12:42.I am at lending policies that borrows from the IMF and the
:12:42. > :12:48.entirety of the authority's relative to those countries and
:12:48. > :12:52.currencies on the other side able to be him and all those entities
:12:52. > :12:57.including the European Commission as what's called conditions
:12:58. > :13:05.bringing to do inconsistency to access to the pounds. That's what
:13:05. > :13:10.happens in all those programs. A neat to get the design right. It
:13:10. > :13:16.goes back to that climbing. It's not a question of just one of set
:13:16. > :13:19.of programs. This is an adjustment process. It can ultimately be done
:13:19. > :13:24.but you just put Prosser's that will take years. Her how many
:13:24. > :13:29.years? I can come back here in three years and we could still be
:13:29. > :13:33.talking about this. Win the Governor of the European Central
:13:33. > :13:37.Bank said in July in London that he would do what it takes to say the
:13:37. > :13:46.euro, the markets rose thinking he would take robust action. Since
:13:46. > :13:51.then people said he did create a false impression? The market Ms
:13:51. > :13:57.raid what you announced one week later. To Rea but wait at Myer at.
:13:57. > :14:04.The measures announced towards the end of July, but one major images
:14:04. > :14:08.and the Big Sue in the way to address this crisis. They go
:14:08. > :14:18.directly to their responsibilities to get rid of convertibility
:14:18. > :14:24.
:14:24. > :14:29.rescues -- Rees. Countries need to pay more -- Rees. -- risk. He
:14:29. > :14:35.delivered what he alluded to. you think Winnie the about the
:14:35. > :14:43.governor or the German bank recently said in an interview in
:14:44. > :14:49.July I'd at he thinks that policy makers have estimated the Central
:14:49. > :14:53.Bank's expect eight sheets. Using for price stability and to promote
:14:53. > :14:59.growth and unemployment and stabilising the banking system.
:15:00. > :15:09.You're governor. This applies to the European Bank people expecting
:15:10. > :15:12.
:15:12. > :15:17.too much. What other tools in your If I can speak for Mario Monti as
:15:17. > :15:22.well, I know both gentlemen quite well. We are all in agreement that
:15:22. > :15:27.central banks cannot solve this crisis. They have to focus on first
:15:27. > :15:33.delivering price stability. It is in nobody's interest to have
:15:33. > :15:39.inflation. We have to do our bit, not in entirety, to keep the
:15:39. > :15:46.financial system functioning. Thirdly, within the European
:15:46. > :15:51.Monetary Union, they need to ensure that there is not a risk that
:15:51. > :15:55.governments are paying that relates to the possibility that the euro
:15:55. > :15:59.will not continue to exist, in other words they apply it -- paying
:15:59. > :16:03.higher interest rates. Central banks can do that. But just that
:16:03. > :16:08.will not be sufficient to produce the growth and employment of people
:16:08. > :16:11.want. But there was another point, that all central banks come under
:16:11. > :16:17.pressure to use monetary policy to tackle what are essentially
:16:17. > :16:22.political problems. How far can the Government or central banks operate
:16:22. > :16:26.independently from the political sphere? It is extremely important
:16:26. > :16:30.that central banks... We are all given remits from national
:16:30. > :16:36.authorities. They are grounded in legislation, sometimes constitution.
:16:36. > :16:40.We have to be disciplined in acting consistently with those
:16:40. > :16:46.responsibilities. But then we act independently within that context.
:16:46. > :16:50.It is essential we act consistently, again going back to the ECB,
:16:50. > :16:55.clearly grounded why they are doing what Mario Draghi has proposed an
:16:55. > :16:59.is grounded in the remit. As long as we continue to do that, the
:16:59. > :17:07.political independence of the central back should be assured.
:17:07. > :17:13.Looking at the UK, in August, it downgraded the economic forecast
:17:13. > :17:22.for growth to 0%. And yet Mervyn King said previously that the
:17:22. > :17:27.government Bank of England, weight, things will get better. But it has
:17:27. > :17:32.not happened. Do you think he is doing the right things here? Yes.
:17:32. > :17:37.Relative to their mandate, to deliver price stability, the Bank
:17:37. > :17:41.of England has anticipated much of the softness in the UK economy and
:17:41. > :17:46.provided a tremendous amount of stimulus. What is different than
:17:46. > :17:50.when, I don't know when exactly you are quoting Mervyn King, but what
:17:50. > :17:55.happened in the intervening months is Europe has got much worse. That
:17:55. > :18:01.is having an impact not just on the UK economy, on the Chinese economy
:18:01. > :18:06.as well. It is even impacting the Canadian economy, despite the fact
:18:06. > :18:11.that they are relatively a minor trading partner to the EU. That is
:18:11. > :18:13.shading a lot of UK outcomes as well. But the one clear things most
:18:13. > :18:18.central bank governors have is obviously that their colleagues
:18:18. > :18:21.they have set the level of interest rates and some people have said
:18:21. > :18:30.that perhaps they are too preoccupied with keeping price
:18:30. > :18:35.stability and making sure inflation does not get beyond 2% -- below 2%.
:18:35. > :18:40.That perhaps the argument of some economists, but a bit of inflation
:18:40. > :18:45.might not be a bad thing, people might say if they have index-linked
:18:45. > :18:51.wages that their income will go up a bit. In real terms, the cost of
:18:51. > :18:55.borrowing of their loans will go down. Are we all to her -- obsessed
:18:55. > :18:59.with inflation prices? I think we are appropriately obsessed with
:18:59. > :19:03.price stability. The risk in the UK has been deflation. What the Bank
:19:03. > :19:07.of England did over the course of the last very difficult year and
:19:07. > :19:11.half is continue to provide additional stimulus. Interest rates
:19:11. > :19:15.cannot go lower. They provided additional stimulus through bond
:19:15. > :19:19.purchases and quantitative easing. In order to ensure that at this
:19:19. > :19:26.point in time, and subsequent months, there is not deflation in
:19:26. > :19:33.the UK. Price stability goes two ways. It is nice that was said...
:19:33. > :19:38.He did say that. Let's take a couple of examples. Briefly. If you
:19:38. > :19:42.are on a fixed income, I am not sure he has done you a favour. But
:19:43. > :19:46.the second thing is that in order for this to work, in order for this
:19:46. > :19:50.to make a difference, you have to get ahead of the bond market and
:19:50. > :19:54.have a large surprise quickly in order to make a difference on the
:19:54. > :19:57.fiscal side. And it would work. know they are looking for a
:19:57. > :20:02.successor of Mervyn King when he stepped down. Your name is
:20:02. > :20:08.circulated in the press. Are you interested? I am interested in who
:20:08. > :20:13.they kick. But it might be you. Your wife is English and have
:20:13. > :20:17.connections. Why not? It is an extremely important post and I am
:20:17. > :20:21.focused on my post at the Bank of Canada. I look forward to working
:20:21. > :20:30.with the next Governor of the bag of England. But until June next
:20:30. > :20:34.year, I enjoy working in Canada. or never? Both. Looking at Canada,
:20:34. > :20:38.although you don't have much exposure to fading European bans
:20:38. > :20:42.all the debt crisis in the eurozone, you do through the US, your biggest
:20:42. > :20:46.trading partner. So therefore the eurozone is a problem. But the
:20:46. > :20:50.narrative has always gone that Canada's financial institutions
:20:50. > :20:56.whether the financial crisis well. Is that still the case? You have
:20:56. > :20:59.still got high household debt at the moment and overheating, the
:20:59. > :21:04.markets and so on. There are problems in the banking system.
:21:04. > :21:09.Aren't there? Our banking system is still the strongest, one of the
:21:09. > :21:13.strongest, in the world. We have one of the highest capital rates
:21:13. > :21:16.and lowest liquidity. The issue is in a property market and household
:21:16. > :21:20.dead but they have both been increasing over the course of the
:21:20. > :21:25.recession that the UK and others have been in. Because there is no
:21:25. > :21:30.export market. That is where growth years. We have tightened the
:21:30. > :21:35.regulations around lending into property four times. We have
:21:35. > :21:41.increased capital ratios so that by January 1st, we will be at the end
:21:41. > :21:44.state for capital. But you banking crisis, Standard & Poor's has
:21:44. > :21:49.really revised its outlook on several Canadian banks from stable
:21:49. > :21:56.to negative. Could a banking crisis the brewing heir? No. That is the
:21:56. > :22:01.short answer. The Asher brewing their? Are the difference is that
:22:01. > :22:04.any risky lending to the property market is backed by insurance that
:22:04. > :22:08.is provided effectively by the Governor of Canada. If there were
:22:08. > :22:13.issues, it very quickly goes back on to the Governor's balance sheet
:22:13. > :22:17.and that is the balance sheet that is the strongest. Amongst the
:22:17. > :22:22.strongest in the G20. We talked about interest rates and Mervyn
:22:22. > :22:25.King at what about you. Would you raise interest rates? We are in a
:22:25. > :22:29.very different place than the major crisis economies such as the UK.
:22:29. > :22:34.Our economy is almost at full capacity. The labour market has
:22:34. > :22:37.been growing. The extent to which we continue to grow above trend, we
:22:37. > :22:43.may withdraw some of that monetary policy stimulus in the end.
:22:43. > :22:48.Interest rates are 1% in Canada, very low. We have a financial
:22:48. > :22:52.system which is firing all cylinders so we will adjust if it
:22:52. > :22:57.is appropriate. That said, the world as a dangerous place for
:22:57. > :23:07.stuff it is. We have seen growth downgraded to a% in China, 6% in
:23:07. > :23:07.
:23:07. > :23:13.India, 2.5% in Brazil and those on major economies. -- 2% -- 8% in
:23:13. > :23:18.China. Will that affect you? years. Commodity prices are down,
:23:18. > :23:27.still higher than historic averages, but there is an adjustment and a
:23:27. > :23:32.filly synchronised the acceleration of the global market. Two keep
:23:32. > :23:37.things. You wear two hats. Do you think that we are moving in the
:23:37. > :23:41.right direction to make sure that failing financial institutions are
:23:41. > :23:45.not bail out by the taxpayer and that we will have a regulatory
:23:45. > :23:53.system which is transparent, which will also ensure that we don't see
:23:53. > :23:57.the kind of scandals that we are now hearing about? I am questioning
:23:57. > :24:01.whether we are moving in the right direction. By the end of this year,
:24:01. > :24:05.it will be absolutely clear to you, to institutions and there G20
:24:05. > :24:11.leaders what is left to be done and that everybody is held to account