UPDATE 1-Bank of Canada pushes for reform to prevent crisis
* Current turmoil a reminder of need for reform
* Canada undecided if CCP should be onshore, offshore
TORONTO, Sept 19 (Reuters) - Global policymakers need to push through with contentious new bank regulations to prevent another 2008-style crisis, a senior Bank of Canada official said on Monday.
"The current bout of turbulence, like the financial crisis of three years ago, serves as a reminder of why it is fundamentally important to have a resilient financial system," Timothy Lane, deputy governor at the Bank of Canada, said in a speech.
Lane was speaking as global bankers push back against some aspects of the global financial reform agenda, warning, for example, that a capital surcharge on the world's largest banks could put economic recovery at risk. [ID:nS1E78D1CH]
While Canada's comparatively tough regulations are widely credited with saving the country from bank failures during the past crisis, Lane said one glaring weakness was exposed: the need for central counterparties (CCPs) for clearing over-the-counter derivatives.
CCPs guarantee against default should one party in a contract, trade or investment be unable to pay.
The Bank of Canada is now grappling with whether to develop a domestic CCP or put its energies toward working with an offshore CCP for its OTC market, which Lane valued at just under C$9 trillion (US$9.1 trillion).
That's big enough that any disruption in the derivatives market would have an effect on other markets in Canada, such as the bond market. More than half of the trading in Canadian dollar interest-rate products involves at least one foreign resident.
"Whatever solution we adopt must come to grips with both of these realities -- the systemic importance of OTC derivatives to Canada and the globalized nature of the market," Lane said.
He made the remarks at the annual Sibos conference held by the Society for Worldwide Interbank Financial Telecommunication (SWIFT) in Toronto.
The speech contained no reference to Canadian monetary policy, with markets focused on a speech set to be made by bank Governor Mark Carney on Tuesday.
($1=$0.99 Canadian) (Reporting by Andrea Hopkins; writing by Louise Egan; Editing by Jeffrey Hodgson and Peter Galloway)
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