UPDATE 1-Financial risk weighs less on monetary policy - Bank of Canada

Mon Nov 18, 2013 11:39am EST

MONTREAL Nov 18 (Reuters) - The financial reform agenda pursued by the Group of 20 leading economies has reduced the risk of a financial collapse, taking some pressure off central bankers, Bank of Canada Senior Deputy Governor Tiff Macklem said on Monday.

"The substantial progress achieved in implementing the G20 financial reforms has made the global financial system safer," Macklem said in prepared remarks for a panel discussion at a Montreal conference.

"Correspondingly, this risk is now weighing less on our monetary policy decisions. For me, at least, that's one measure of progress," he said.

Macklem said the job is not yet finished, however, and he outlined four areas where regulators and banks must do more work:

-setting leverage limits for banks;

-establishing a "bail-in regime", which allows failing banks to be recapitalized;

-further strengthening the central counterparty system and improving banks' risk disclosure;

-governance and culture of ethical practices.

Macklem provided no guidance on the Bank of Canada's monetary policy or its outlook on the economy.

The central bank signaled last month it has no plans to touch interest rates anytime soon, a major policy shift after 18 months of suggesting rate hikes were on the horizon. Inflation has been persistently weak and growth disappointing. But the central bank suggested rate cuts are off the table for now because of record-high levels of personal debt.

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