Carney says Canadian deposits safe under bail-in, but offers no guarantee

OTTAWA – Mark Carney says policy-makers are working diligently to devise an international “bail-in” regime to prevent big bank failures, but he offered no guarantee that individual deposits would be protected.

The Canadian central banker, who is a few months away from heading the Bank of England, says banks must have a set of buffers in place to draw on in an emergency.

Speaking during a televised interview in Washington, Carney appeared to disagree with the approach taken in Cyprus last month that involved taxing deposits, but would not state his personal position because he said it might be misinterpreted.

He notes that the Canadian government has pledged not to dip into individual deposits.

Carney did not answer whether there should be a total hands-off treatment to non-secured accounts as well, which in Canada would mean deposits over $100,000.

Still, Carney says Canadians should not lose any sleep over the safety of their deposits.

He says Canadian institutions have sufficient capital and other buffers in place making it hard to fathom why it would be necessary to dip into deposits.

In the March budget, Finance Minister Jim Flaherty said the government would implement a “bail-in” regime for systemically important banks to ensure that in case of failure, there would be no need for governments to bail them out.

On another issue, Carney says interest rates could rise sooner if Canada’s housing market and debt accumulation is not tempered, but noted both are slowing.