BASEL, Switzerland (MNI) – The financial system remains at risk and
authorities must beware of the potential for spillover effects, Bank of
Canada Governor Mark Carney said Tuesday.

Carney, speaking to the press in his capacity as chairman of the
Financial Stability Board, expressed confidence in the personal
integrity of Swiss National Bank President Philipp Hildebrand, who had
also been vice chair of the FSB until he was forced to resign Monday
over allegations of insider trading.

After meeting today, Carney said, the FSB determined that
“vulnerabilities remain” and “financial authorities must guard against
feedback.”

“The sovereign debt crisis in the euro area continues to weigh on
the global financial system,” the FSB said in a statement. “High risk
aversion and weak economic growth are compounding the refinancing
challenges facing sovereigns and financial institutions. Although market
conditions have improved in recent weeks, downside risks remain
substantial.”

The FSB welcomes the policy measures authorities have recently
taken to counter the crisis and favors the full and prompt
implementation of measures to support confidence and lower market
tensions, the statement said.

Carney called on the financial industry to continue to repair and
reinforce its balance sheets, and said that the members of the FSB had
agreed that they were “ready to act to contain spillover risks” if need
be.

Carney was queried repeatedly about Hildebrand, whose appointment
as vice chairman of the FSB last November, he said, “reflected the
unique set of skills and attributes that Mr. Hildebrand possesses.”

“By consequence, [from] the fact that Mr. Hildebrand had to resign
from the FSB yesterday…it does not immediately follow that there will
be a replacement,” Carney said. “That’s a decision that will be taken in
the fullness of time…in consultation with the G20.”

“I very much regret that Hildebrand had to resign yesterday,”
Carney added. “I respect that decision…I have the utmost respect for
his integrity.”

Hildebrand made “an immense contribution” to financial reform and
crisis management, and “the entirety of the FSB membership” thanked him
“for his contribution over the years,” Carney reported.

Asked if the importance of Switzerland as a financial center had
suffered as a result of Hildebrand’s resignation, Carney said that
“Switzerland remains a core and productive member of the Financial
Stability Board. Its members today made productive interventions and
contributions to our work. We continue to look forward to working with
Swiss authorities.”

–Frankfurt bureau tel.: +49-69-720142. Email: dbarwick@marketnews.com

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