March, 26, 2010

TD Bank chief executive Ed Clark says some of the global rules being proposed by regulators could actually have a negative impact on the banking system.Clark told investors at the bank's annual meeting in Quebec City Thursday that one rule would require banks to put up the same amount of capital for both high-risk and low-risk assets.

He said such a requirement would likely push Canada's banks to invest in more high-risk assets than they have because of the bigger potential returns compared with lower-risk holdings, such as mortgages. He said the shift could increase the risk of another financial crisis."Under the proposed rules, holding low-risk mortgages would not generate sufficient returns on the capital required. As such, banks would be forced to adopt higher risk strategies," Clark said.

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