mark carney : from green shoots to the harvest – comments on financial stability remarks by mr mark carney, governor of the bank of canada, to the regina & district chamber of commerce, regina, saskatchewan, 18 june 2009. * * * it is a pleasure to be back in saskatchewan. this great province has been one of the fastestgrowing parts of the country in recent years, benefiting from increasing diversification into biotechnology, alternative energy sources, and carbon - management solutions, among other industries. today, i will refer to the traditional backbone of this economy : agriculture. i do so because lately there has been much talk of " green shoots " in the global economy. from the initially careful references to data that suggested a slowing of the rate of decline in global activity, the use of the term " green shoots " has quickly evolved. some now refer to green shoots as if the global recovery is a foregone conclusion or even as if sustainable growth had already begun. would that it were so easy. saskatchewanians know that it is a long, anxious time between the appearance of seedlings and the harvest. much hard work remains, and external forces can profoundly influence the outcome : too little or too much rain, hail, pests, and disease can all frustrate even the most promising beginnings. and, in the end, global forces of supply and demand determine the prices received. old adages usually contain great wisdom : just as you don't count your chickens before they are hatched, we shouldn't presume that green shoots today guarantee a bumper crop tomorrow. financial stability and the bank of canada i want to extend this analogy to provide some perspective on recent developments in canadian financial stability. financial stability is the resilience of the financial system to unanticipated adverse shocks. this resilience determines the extent to which canadian households and businesses have access to the credit they need at appropriate terms and conditions. while our financial system is one of the soundest in the world, the ferocity of the once - in - alifetime global financial tempest has affected all canadians, regardless of their location or occupation. so, does our financial system still leave us well positioned for our green shoots to mature into a viable crop of summer wheat? 1 the bank of canada is well placed to make this judgment. as part of our commitment to promote the economic and financial welfare of canada, the bank actively fosters a stable and efficient financial system. the bank constantly assess

us dollar than at the beginning of 1999, and 4 % above the average over the intervening period. euro area payment systems have proven effective, even in the financial crisis. no controls have been imposed on movement of euro - denominated assets, either within or outside the euro area. as a result, there is no currency crisis in the area, and it is therefore misleading to speak of “ the crisis of the euro ” as such. this does not change the fact that the euro area is currently faced with a complex web of problems that, if worse comes to worst, could threaten its very existence if political support for the currency union wanes. the eurozone ’ s current economic and financial difficulties are due in part to the fact that, together with the us, the uk, and switzerland, the euro area was one of the sources of the financial crisis that began in mid - 2007 and peaked in autumn 2008. in the beginning, the crisis had little to do with flaws in the design of the euro area. ensuing developments unveiled those flaws, however. when all is said and done, the flaws stem from the fact that, even though the euro area is referred to as an economic and monetary union, the economic and fiscal aspects were largely missing ( see chapter 15 ). furthermore, the eu regulatory framework for cross - border banking operations is severely flawed in that eu - wide operational freedom was coupled with national supervision and deposit insurance – and, in the case of non - euro countries in the eu, national liquidity facilities. this made it much more difficult to address problems in the banking system at the peak of the financial crisis. to some degree, this may explain why the european banking system was not sufficiently restructured at that time and to a lesser extent than, for example, in the us. the banking system was therefore more vulnerable when the sovereign debt crisis struck several euro area countries as a result of prolonged lack of fiscal discipline ( see chapter 15 ), economic policy, and the financial systems of the countries affected. therefore, the euro area is currently battling a fiscal crisis in some member countries, a competitiveness and current account crisis in the region as a whole, a deep banking crisis in some countries, and a fragile banking system in many others, which would be exacerbated if the sovereign debt crisis should end in default by any of the countries concerned. a currency crisis as such is not part of the problem, however, any more than it was in the us. as is