of canada estimates a net present value of basel iii for g - 20 economies is 30 per cent of gdp in present - value terms, or about $ us13 trillion. 5 assuming a 2 - percentage - point increase in capital ( plus liquidity changes ). for canada, estimates are approximately 13 per cent of gdp in present - value terms, which is equal to about can $ 200 billion. see bank of canada, “ strengthening international capital and liquidity standards : a macroeconomic impact bis central bankers ’ speeches in short, while the worsening global economic outlook has implications for bank performance, it does not provide a rationale for delaying the implementation of basel iii. conclusion to conclude, critics of reform generally succumb to three world - weary arguments : any rule will be arbitraged ; any insurance will promote greater risk taking ; and there will always be financial crises. such fatalism should be rejected. in no other aspect of human endeavour do men and women not strive to learn and to improve. the sad experience of the past few years shows that there is ample scope to improve the efficiency and resilience of the global financial system. by clarity of purpose and resolute implementation, we can do so. the current reform initiatives mark real progress. the fundamental objective of the g - 20 measures is a resilient, global financial system that efficiently supports global growth. our destination should be one where financial institutions and markets play critical – and complementary – roles to support long - term economic prosperity. this requires institutions that are adequately capitalized, with sufficient liquidity buffers to manage shocks. it also requires that market forces be allowed to determine the relative sizes and boundaries of the banking and shadow banking sectors ; and that the market decides which firms prosper and which firms fail. the fsb has a clear role to oversee and coordinate the development of the g - 20 reforms. it should provide a system - wide perspective and assess the total impact of reforms. it must strive to resolve any conflicts that may arise between regulations that are locally optimal but systemically inconsistent. it must balance the need to guard against regulatory arbitrage with the value of preserving diverse risk - taking strategies and productive innovation. finally, it must ensure consistent implementation across jurisdictions to build an open and competitive system. it is also important not to lose sight of the limitations of regulation. new and better rules are necessary, but not sufficient. people will always try to find ways around them. some may succeed, for a while

david dodge : summary of the latest monetary policy report opening statement by mr david dodge, governor of the bank of canada, to the standing senate committee on banking, trade and commerce, ontario, 26 october 2005. * * * good afternoon, mr chairman and members of the committee. we appreciate the opportunity to meet with this committee twice a year, following the release of our monetary policy reports. these meetings help us keep senators and all canadians informed about the bank's views on the economy, and about the objective of monetary policy and the actions we take to achieve it. when paul and i appeared before this committee last april, we said that the economy appeared to be operating slightly below its production capacity, and that we expected it to move back to full capacity in the second half of 2006. in our october monetary policy report, which we published last thursday, we said that economic growth in the first half of the year was somewhat stronger than we had previously expected. indeed, the global and canadian economies have continued to grow at a solid pace, and our economy now appears to be operating at full production capacity. past and recent movements in energy prices and in the exchange rate for the canadian dollar, along with competitive pressures from china and other newly industrialized economies, are giving rise to significant ongoing adjustments in the canadian economy. given these adjustments and the slow growth of productivity in recent years, the bank has slightly reduced its estimate of potential output growth for 2005 and 2006. the bank projects that the economy will grow in line with production potential through 2007, with growth averaging 2. 8 per cent this year, 2. 9 per cent in 2006, and 3. 0 per cent in 2007. with the economy operating at capacity and with higher energy prices, pressures on consumer prices are somewhat stronger than they were at the time of the july monetary policy report update. assuming energy prices evolve in line with currently prevailing futures prices, cpi inflation is projected to average near 3 per cent through the middle of 2006, before returning to the 2 per cent target in the second half of next year. core inflation should remain below 2 per cent in coming months, returning to 2 per cent by mid - 2006. the bank raised its key policy interest rate to 3 per cent on 18 october. in line with our outlook, some further reduction of monetary stimulus will be required to maintain a balance between aggregate supply and demand over the next four to six quarters, and to keep inflation on target. short - term risks to this projection appear to be