has been the existence or the absence of the independence of the central bank. many have found fault with exter for making the secretary to the ministry of finance a member of the monetary board. they have argued that this official member with his own self interest in funding the government expenditure programs would use the opportunity to dictate terms to the monetary board, thereby permitting the fiscal policy to override monetary policy. it has been equated by some critics to the case of permitting a child to put his hand into the cookie jar as many times as he wishes. while these criticisms may have some validity, exter ’ s wisdom has been to create an environment for both the government and the central bank to have a peaceful and amicable cohabitation. exter has argued in his report that “... there are, however, many important problems of monetary policy, especially those relating to fiscal policy, on which a central bank should work in close harmony with the government ”. accordingly, a degree of independence has been afforded to the central bank unlike other governmental bodies. this independence extends to the budget of the central bank, job security of the key central bank officials, and power to make monetary policy without consulting the government. the wisdom of exter was that the central bank should as far as possible work in consultation with the government, rather than in isolation. he believed that the true independence of the central bank could be preserved only through that consultative method. in the words of exter, “ the ideal is … one in which there will be continuous and constructive co - operation between the monetary board and the government. the principal instrument for achieving this co - operation should be the permanent secretary to the ministry of finance whose membership on the board will ensure at all times that his minister ’ s views will be made known to the other members of the board ”. however, exter did not expect this arrangement to be effective at all times. hence, he made the proviso that “ it would depend on the men occupying the key positions ” and not on any legal formula. he argued quite correctly that such complex and delicate relationships cannot be established full - blown by a piece of legislation. it must be the result of years of experience and the slow growth of political conventions. the writer has been questioned on this point on many occasions at numerous public fora. the position taken by him agrees fully with that of exter. this position requires the critics to compare central bank ’ s independence with the relationship within

a comprehensive financial reform agenda, coordinated by the financial stability board ( fsb ), to address the exposed weaknesses, to promote global financial stability, and to enhance financial and economic integration. since then, fsb member countries have made unprecedented progress on these objectives. canada and the united states have signed three major trade liberalization agreements over the past 50 years : the 1965 auto pact, the 1988 canada – u. s. free trade agreement and the 1994 north american free trade agreement, which also included mexico. the banking system did, however, require significant liquidity support because of the severe disruption to global funding markets. m. carney, “ exporting in a post - crisis world ” ( speech to the greater kitchener - waterloo chamber of commerce, waterloo, ontario, 2 april 2012 ). bis central bankers ’ speeches i ’ ll start with a brief overview of important reforms to the global banking system and to shadow banking — which refers to credit intermediation activities outside the traditional banking system — that have made the financial system as a whole safer. 4 then, i ’ ll zero in on two reform areas that need more work : global banks that are “ too big to fail ” and over - thecounter ( otc ) derivatives markets. finally, i ’ ll say a few words about a third policy issue that is critical for supporting financial integration — cross - border payments. reforming the financial system led by the g - 20, the fsb and the international standard - setters are developing and monitoring the implementation of the required regulatory standards. 5 their successful reform efforts have helped rebuild trust in financial integration that was severely damaged by the crisis. a significant accomplishment is the basel iii framework, which has made global banks much stronger and more resilient. the framework, which requires banks to hold more capital and liquidity and imposes a backstop leverage limit, has largely been finalized. 6 although the deadline for full implementation is not until 2019, many jurisdictions, including canada, are well ahead of schedule. 7 as for shadow banking activities, they represented key sources of financial instability during the crisis through faulty subprime mortgage securitization and runs on money market funds and repo markets. the fsb is creating a comprehensive approach to monitor and assess these non - bank credit intermediation activities. regulatory standards have been developed for several of the activities. for example, standards exist for securitization, specifically risk retention and disclosure ; money market funds, including liquidity and