Bank executive excess blamed for crisis

By Greg Quinn  |   2008-11-24  |     NEWSPAPER EDITION

BANK of Canada Governor Mark Carney said the global financial crisis was caused in part by banking executives who thought about opera and ski trips instead of risks in their loan portfolios.

Regulators and executives were "seduced" by the idea that risk was "spread thinly around the world" by packages of loans, Carney told the British Broadcasting Corp in a radio interview broadcast at the weekend.

Carney, 43, a former Goldman Sachs Group Inc investment banker, also said he was troubled by talks he had with bank executives during the past five years, Bloomberg News reported. "If you were having a conversation with a central banker like myself, and the chief executive drifted into opera or the ski slopes of Davos or some type of social setting, that's an issue," Carney told the network.

"There is vicious natural selection going on right now in the financial services industry, and it's appropriate," Carney said in the interview. "Those who weren't on top of things are gone or going."

The credit crisis might have been prevented if other countries had regulations like Canada's, Carney said. The country's banks were rated the strongest by the World Economic Forum last month.

"It's like many things - it's excess," Carney said. "Fundamentally, the ideas were sound, but they got applied too widely and ultimately by people who had forgotten about the fundamentals, or never knew the fundamentals of what they were doing."

Carney told the network that regulators should avoid worsening a worldwide recession by forcing lenders to stockpile more capital while economies were slowing.