OTTAWA — Bank of Canada governor Stephen Poloz says it was crucial to tighten regulations following the 2008-09 financial crisis but reforms must leave enough room to allow for the creativity of "natural" market forces.
"A return to sustainable economic growth around the world will require continued financial innovation," said Poloz in the text of a speech prepared for his address Thursday to the Economic Club of New York.
"Regulation must allow these natural forces to manifest themselves, albeit in a safe way."
Poloz's speech explored several different areas where the "forces of competition" could emerge under new regulations: market-based finance, private lending and equity, and public finance.
He said the introduction of new financial rules were costly but key to rebuilding the public's trust and small in comparison with fallout from the financial crisis.
Poloz recalled how the financial crisis destroyed over 60 million jobs worldwide and, by the end of last year, it had led to a cumulative loss in global output of roughly $10 trillion, or close to 15 per cent of the world's gross domestic product.
He said the core of the world's financial system is far safer today, even though some issues must still be addressed, and credited the resilience of Canada's financial system in helping the country emerge from the financial crisis in better shape than most countries.
"Even so, we saw significant destruction in our export sector, the backbone of our economy," Poloz said.
He added, however, that Canada has seen signs of increasing exports, business investment and job creation, though he noted it will likely take another couple of years before the economy will have steady growth with inflation on target.
"It is this return to natural growth that we all want to see," Poloz said.
"We need to embrace our new regulatory architecture and get on with the job."
