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WASHINGTON–Global finance chiefs pointed to glimmers of hope that a deep recession might be easing but warned ahead of Friday meetings that they must clean up bank balance sheets to pave the way for recovery.

"If we do not fix the banks, we will not fix the economy," British finance minister Alistair Darling said. He added that the Group of Seven nations and larger G20 club must also follow through on pledges to fatten resources for key global lenders.

U.S. Treasury Secretary Timothy Geithner, who hosts an afternoon G7 session and a G20 gathering in the evening, wrote in the Financial Times that there were "encouraging signs that the global economic downturn may be slackening" but cautioned it was no time to let up on efforts to boost revival.

"The G20 nations must follow through on their commitment to deliver the fiscal, monetary and financial policies necessary to restore growth," Geithner said, underlining the fact that these meetings are largely to flesh out promises made at a G20 session of political chiefs in London on April 2.

Those promises include adding hundreds of billions in fresh financing for the International Monetary Fund, which is holding semi-annual meetings this weekend with the World Bank, and freeing up more money for bolstering global trade.

It is not yet clear, however, where all those funds will come from, and the IMF is pressing officials from around the world to contribute or increase money already pledged.

The G7 developed nations are expected to issue a communique around 4:30 p.m. but no statement is expected from the later meeting of the G20.

Two G7 officials indicated the communique's section on currencies would likely be unchanged from the statement issued after the last meeting in February. At that time, the group welcomed China's commitment to move to a more flexible exchange rate and warned that extreme volatility in foreign exchange markets posed a threat to economic and financial stability.

"There is no reason for the paragraph on currencies to change. For the moment, there has been a realignment. There is volatility but no currency that has broken away completely," one official said.

The G7 comprises the United States, Britain, Canada, France, Germany, Italy and Japan, while the G20 includes those and a key group of emerging economies, like China and India instant payday loan.

Overlaying the other woes faced by the global economy, which the IMF says will shrink by 1.3 per cent this year, is the issue of mounting bad debts on bank books that are choking the flow of credit to the world economy.

IMF Managing Director Dominique Strauss-Kahn said the mission of today's meetings must be to add urgency to the drive to clean-up balance sheets so banks can resume their normal role as lenders – an effort the IMF says is lagging.

"The point on which the IMF is seeking major efforts is on the clean-up of the banks so that credit gets flowing again, credit for companies, credit for investments and credit for private citizens," he told French reporters. "I wouldn't say nothing has been done but it's not going fast enough."

In the United States, 19 of the largest banks have undergone stress tests to assess whether the government will have pump more money into them. A paper setting out the variables used will be released Friday, but the results themselves won't be issued until May 4.

The problem of toxic assets is global, thanks in part to the U.S. practice of bundling mortgage loans – good and bad – into securities that were sold worldwide during the go-go banking years that led to the U.S. housing crash.

The IMF estimated this week that credit losses globally could reach $4.1 trillion, leaving gaping holes in balance sheets that must be filled either by private or public money. Banks worldwide have so far raised about $900 billion in capital, about half of it through government rescue loans.

The Fund thinks U.S. banks face further write-downs of $550 billion over the next two years, while the euro zone needs to write down $750 billion and Britain $200 billion.

Some G7 members are growing frustrated that there has been less action than talk despite a series of ministerial meetings since the financial crisis first erupted in August 2007.

"There has not been as much progress as we had expected in January and that has meant our recession is going to last another quarter longer, and the recovery is going to be a bit more muted," Bank of Canada Governor Mark Carney said on Thursday.

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General Motors Corp. is planning to temporarily close most of its U.S. factories for up to nine weeks this summer because of slumping sales and growing inventories of unsold vehicles, two people briefed on the plan said Wednesday.

The exact dates were not known, but both people said they will occur around the normal two-week shutdown in July to change from one model year to the next. Neither person wanted to be identified because workers have not been told of the shutdowns.

GM spokesman Chris Lee would not comment other than to say the company notifies employees before making any production cuts public.

The automaker is living on $13.4 billion in government loans and faces a June 1 deadline to cut its debt, reduce labor costs and take other restructuring steps. If it doesn’t meet the deadline, the company’s CEO has said it will enter Chapter 11 bankruptcy protection.

United Auto Workers officials at several factories said they have meetings scheduled today and Friday with plant managers and GM human resource officials to discuss production changes no teletrack payday loans.

The automaker’s sales were down 49 percent in the first quarter compared with the same period last year, and GM had a 123-day supply of cars and trucks at the end of March, according to Ward’s AutoInfoBank. GM already has more than a six-month supply of several models.

GM employs more than 1,900 workers at the Wentzville plant, where full-size vans are made. Union representatives for the plant could not be reached for comment late Wednesday afternoon.

Angela Tablac of the Post-Dispatch contributed to this report.

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BRUSSELS – The European Union opened antitrust investigations Monday into airlines that fly lucrative trans-Atlantic routes as part of the Star and oneworld airline alliances, saying it suspected their cooperation was restricting competition.

The European Commission said the co-operation within the two groups on routes between Europe and North America "appears far more extensive" than the joint approach on other routes.

"On the basis of what the Commission has seen so far, we think there may be breaches of antitrust rules," said EU spokesperson Jonathan Todd.

European antitrust officials will now check whether the trans-Atlantic airline pacts represents a restriction of business competition which might hurt consumers and other companies.

The Star Alliance airlines targeted by the investigation are Air Canada (TSX: AC.B), Lufthansa and United as well as Continental Airlines, which is expected to join after getting a nod from the U.S. Transportation Department early this month. Oneworld members under investigation are American Airlines, British Airways and Iberia.

The investigations only centre on the member airlines that fly trans-Atlantic routes and do not affect the other members of the alliances faxless payday loan.

The EU has long been suspicious how airline alliances such as Oneworld and Star Alliance affect prices for flying between Europe and the United States.

Airlines do not compete directly against other alliance partners on some routes and instead may share a code for the same flight and pool some staff and services to lower costs. Such alliances emerged because many national rules discourage airlines from merging for fear of losing exclusive rights to flying routes.

Todd insisted that opening such an investigation only signified it would deal with the cases as a priority matter and did not mean there was proof of any wrongdoing.

"It doesn't mean we have conclusive proof there are breaches of antitrust rules," he said.

The Commission said in a statement it was centring its inquiry on the agreement between the airlines of the same alliance to jointly manage schedules, capacity, pricing and revenue management on the busy route.

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Anheuser-Busch plans to outsource two small operations that supply signs and trinkets, a change that will put about 100 employees in Missouri and Illinois out of work.

The company expects to close a warehouse in Mt. Vernon, Ill. later this year. The company said it is working with local leaders and “interested parties” to identify an appropriate use for the facility about 80 miles southeast of St. Louis. The Mt. Vernon site housed the company’s “Point-of-Sale Fulfillment” operation - a fancy title for the signs and displays on store shelves and aisles. “Direct Premium,” an operation that managed small promotional items and was based at A-B’s St. Louis campus, will also shut down.

Neither change will be immediate, and all affected employees will be offered a severance package, according to Anheuser-Busch instant cash loans. The cuts are included in the 1,400 layoffs Anheuser-Busch announced in early December.

“Before this decision, we had identified a need to make significant infrastructure upgrades that would have required a substantial investment,” Dan Hoffman, vice president of brand creative services at Anheuser-Busch, said in a statement. Hoffman said the decision stemmed from “an extensive review” of the company’s business model that began more than a year ago.

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The Pentagon’s pitch to scale back major defense programs may not only put hundreds of jobs at risk at Boeing’s Integrated Defense Systems unit in St. Louis, but also could affect many of Boeing’s suppliers in Missouri and elsewhere.

Defense Secretary Robert Gates wants to cap production of the Boeing Co.’s C-17 transport plane. While final assembly is in Long Beach, Calif., work on the C-17 means 1,000 Boeing jobs in St. Louis.

Missouri congressional leaders are concerned that Gates’ plan would jeopardize jobs at Boeing’s Hazelwood plant, which serves as the final assembly line for the F/A-18 fighter jets.

Gates also wants to stop making Lockheed Martin’s F-22 fighter in which Boeing has a stake.

"It’s not good news," said Republican Congressman Todd Akin of Town and Country, who sits on the House Armed Services Committee.

Like some Republicans, Akin said program cuts would weaken U.S. defense. He added that "Boeing is a big employer" in the St. Louis region.

Many congressional Republicans promised to oppose some of Gates’ cuts. Some such as Sen. Jim Inhofe, R-Okla., represent states where some defense work is in the Pentagon’s cross hairs. One of the vehicles slated to be cut from the Army’s Future Combat Systems program was to be worked on in Oklahoma.

"Sadly, the modernization of our Army is a ‘can that was kicked down the road’ today, yet again," Inhofe said in a statement last week. "Our soldiers deserve better than that."

Boeing is the lead systems integrator on the combat systems program, a role that’s similar to a general contractor.

Sen. Claire McCaskill, D-Mo., said she supported Gates’ efforts to control costs. Weapons systems have "routinely come in obscenely over budget," she said. But she added Gates’ final proposal for F/A-18s and C-17s will affect St. Louis jobs and "deserve close scrutiny."

Defense industry analysts say it may be too early to say who won and who lost, because Gates gave only an outline of spending priorities.

"I can’t give a scorecard," said David J. Berteau, lead defense industry analyst for the Center for Strategic and International Studies, a Washington-based policy research organization. "It’s like we’re being asked to grade a term paper and all we have is the first page and the last page."

Aerospace analyst Richard Aboulafia of the Teal Group said that at this early stage of the budget debate, congressional leaders get to show constituents they’re working for them, the Obama administration gets to show itself as "reformers and change agents," and defense contractors can rally their forces cash till payday advance.

"It’s the battle between ‘time for a change’ and ‘let’s support the folks back home" by preserving jobs, he said. "I would bet on the second. … It is the jobs that will win."

Boeing isn’t the only defense contractor facing possible losses under the Pentagon’s proposal. Lockheed Martin and other defense firms also have products that could be at risk.

Sen. Christopher "Kit" Bond, R-Mo., said the C-17 program is on schedule and within budget. He questioned the Obama administration’s proposal to make the cuts before the results of a Defense Department study of air mobility needs. They are due in June.

Political leaders weren’t the only ones warning of job losses at a time when the nation’s unemployment rate sits at 8.5 percent and is projected to soar higher.

"If we don’t receive additional C-17 orders this year, the production line will shut down by end of next year," said Jerry Drelling, a Boeing spokesman.

Terminating the C-17, he said, would affect 30,000 jobs across the country and would shutter the nation’s last large military aircraft production facility.

Potential job losses also rankled the aerospace workers’ union.

Tom Buffenbarger, president of the International Association of Machinists and Aerospace Workers, took aim at the proposal to cut off funding for Lockheed Martin F-22 Raptor. Boeing workers in Seattle build the wings and rear fuselage.

"Not only is the decision to cut funding for the F-22 shortsighted militarily, but our economy can ill afford to disperse the thousands of aerospace jobs required to design, construct and maintain aircraft of this caliber," Buffenbarger said in a statement.

Missouri Democrat Ike Skelton, chairman of the House Armed Services Committee, said the "buck stops with Congress" in deciding whether to support Gates’ proposals.

And what if they mean job losses in key congressional districts?

"Just remember," he said. "Our job is to defend the United States, its people and our interests. Sometimes you just have to make tough decisions. That’s the bottom line."

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WASHINGTON – At last, after a nerve-racking six-month descent, the U.S. economy appears to be levelling off.

But don't assume the bumps are over.

Stock investors, shoppers and home buyers are less jittery. Once-frozen credit markets are slowly thawing. And economic indicators that had been going from bad to worse are showing signs of stabilizing – though still at distressed levels.

There were fresh signs today that the full force of the recession may be petering out: a strong profit forecast from Wells Fargo, a drop in unemployment benefit filings and several retailers predicting solid April sales. On Wall Street, the Dow Jones industrials rose nearly 250 points.

Still, with unemployment rising, it will be at least several months before the country's economic engine pops into a growth gear. Job losses – and the fear of them – act as a headwind against consumer confidence and spending, which account for more than two-thirds of the U.S. economy.

"The sense of a ball falling off a table, which is what the economy has felt like since the middle of last fall, I think we can be reasonably confident that that is going to end within the next few months, and we will no longer have that sense of a free-fall," President Barack Obama's top economic adviser, Lawrence Summers, said today.

But Summers, who spoke at the Economic Club of Washington, said it was too soon to forecast how strong the rebound would be and when it would take hold.

The economy shrank at a 6.3 per cent rate in the final three months of 2008, the worst showing in a quarter-century. Some economists say it fared about as poorly in the first three months of this year, while others expect a four to five per cent rate of decline. The government releases its initial estimate at the end of April.

And the economy is still shrinking in the April-June quarter – perhaps at a rate of two to 2.5 per cent, some analysts say.

When will it grow again? Maybe the final quarter of the year.

For now, said Brian Bethune, economist at IHS Global Insight, "I think we can say we've gone through the most terrible part of the recession."

The scenarios charted by economists are consistent with Federal Reserve chairman Ben Bernanke's hope that the recession, now in its second year, will end this year.

Bernanke, however, has been quick to caution that this will happen only if the government succeeds in stabilizing financial markets and getting banks to lend money more freely again to both consumers and businesses. To that end, the Fed recently plowed US$1.2 trillion into the economy in an attempt to reduce interest rates for mortgages and other loans.

Even in the best-case scenario, the unemployment rate – now at a quarter-century high of 8.5 per cent – is anticipated to climb to 10 per cent by the end of this year.

History shows that the jobless rate moves higher well after a recession has ended. That's because companies won't want to ramp up hiring – often their single-biggest expense – until they feel confident any recovery will be lasting my credit score.

Consumers, whose sharp cutbacks in spending plunged the country into a steep economic tailspin at the end of last year, seem to be gradually spending more freely.

Today, Wal-Mart Stores Inc., the world's largest retailer, said sales at stores open at least a year increased 1.4 per cent in March. However, discount retailer Target Stores Inc.'s sales fell.

The U.S. government reported last month that consumer spending rose in February for the second month in a row – after a half-year of declines.

Shoppers' appetites to spend should get a lift later this year from tax cuts contained in Obama's $787-billion economic stimulus package. Tax credits of $400 per worker and $800 per couple translate into about $13 a week less withheld from paycheques starting around June.

The hope is that the added consumer spending will prompt retailers to replenish inventories, which have been cut nearly to the bone during the recession. That would require factories to boost production, creating a ripple of positive economic activity.

Today's $3 billion first-quarter profit forecast from Wells Fargo was in part a reflection of the very low interest rates at which banks can borrow money from the government and then lend it out at higher rates to consumers and businesses.

Another positive flicker came today from the U.S. Labour Department, which reported that the number of newly laid off Americans filing for unemployment benefits dropped by 20,000 last week to 654,000.

Although credit and financial conditions have shown some signs of improvement since the worst of the crisis last fall, they are operating far from normally, Fed officials say.

"In view of the state of the credit markets, it seems a fair bet that it will take time for momentum to build," Gary Stern, president of the Federal Reserve Bank of Minneapolis said in a speech today. "But with the passage of time – as we get into the middle of 2010 and beyond – I would expect to see a resumption of healthy growth."

To be sure, the economy is not out of the woods yet. Another bailout of a troubled bank or other company could easily shatter already fragile confidence and send the economy reeling again. The collapse of General Motors would send many more to the unemployment lines and could jolt the economy into a major backslide. And, there's the risk that consumers will once again shut down as jobs continue to vanish.

And, even if the recession were to end later this year, most economists believe economic activity won't return to a more normal pace of around three per cent to 3.25 per cent until late next year.

"Yes we have probably seen the worst … but the shape of the recovery will look more like the Nike swoosh," meaning a gradual – not sharp – rise back to normal, said John Silvia, chief economist at Wachovia Corp.

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Nokia Siemens Networks’ (NSN) key attraction to Nortel Networks Corp is its quarter share of the North American telecom gear market, analysts said on Wednesday.

NSN, a joint venture of Nokia and Siemens, made an unsolicited offer in March for large parts of Nortel’s carrier network group, according to a Wall Street Journal report, citing people familiar with the matter.

The report, published on Tuesday, said the bids being offered for Nortel’s various units are believed to be low.

NSN and Nortel representatives declined to comment.

Last month, a source familiar with the talks told Reuters the two firms had held talks on a possible deal.

Nokia Siemens has bought a few smaller companies — mostly to expand its services and software offering — since starting operations in 2007, and has not ruled out further acquisitions consistent with its focus on profitability and cash flow.

Bernstein Research said Nokia Siemens could pay $500 million to $1 billion for Nortel’s wireless business, which would hike its North American market share to 33 percent from 7 percent.

“Alcatel-Lucent would be the likely loser, missing the opportunity of gaining share,” Bernstein analyst Pierre Ferragu said in a note.

Shares in Alcatel-Lucent were 2.8 percent lower by 0830 GMT, while Nokia was down 1.5 percent, roughly in line with a weaker DJ Stoxx European technology index.

NSN generated revenue of 198 million euros ($261 100% approval faxless payday loans.1 million) in North America in the fourth quarter, just 4.6 percent of total sales. Nokia has for years struggled to gain a significant presence in the operator-dominated North American handset market.

“Could this possible deal open doors for Nokia in North America? That is the big question,” said eQ Bank analyst Jari Honko.

Nortel, once the largest North American maker of telecommunications gear, filed for Chapter 11 bankruptcy protection in U.S. federal court and for creditor protection in Canada’s Ontario Superior Court of Justice in January.

The Wall Street Journal said Nokia Siemens is also interested in Nortel’s LTE business, a new high-speed wireless technology intended to replace the current networks.

The technology is slated to be deployed in the coming years by large wireless telecommunications carriers including Vodafone Group Plc and Verizon Wireless, a joint venture of Vodafone and Verizon Communications Inc.

An auction of Nortel’s enterprise unit last week attracted bids from Avaya Inc and Siemens Enterprise Communications, according to sources cited in the Wall Street Journal. An Avaya representative was not immediately available for comment.

($1=.7582 Euro)

(Reporting by Tarmo Virki and Alexei Oreskovic)

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Is there more to life than collecting the rents pouring out of a $1 billion-plus portfolio of historic properties-turned-Class A office space in downtown Toronto?

Or having enough money to live in the city’s fashionable Rosedale and Yorkville neighbourhoods, or to take a year off to luxuriate in Miami’s impossibly trendy South Beach?

Does anything, in Toronto real estate terms, top the ownership of that celebrated city landmark, the postcard-worthy Flatiron Building? Okay, possibly the CN Tower, but it isn’t for sale.

Two years ago, Michael Tippin and his wife and business partner Anne, both 39 at the time, decided the answer to those questions was yes. After 15 years of assembling their iconic Toronto portfolio with global investors, it was time to break their predictable routine and start over – this time in central and Eastern Europe, or CEE.

"We had become bored and restless," recalls Tippin, "and wanted to do the same thing in CEE," where state-owned properties were being privatized and sold or auctioned off at low prices.

Fortuitously for the Tippins and their partners, global real estate markets hadn’t yet tanked; the Toronto portfolio made pre-recession prices.

Today, the couple is no longer bored or restless. From an office in Budapest, Hungary, the two are focused on finding architectural gems for sale in great locations at low prices – buildings that can also be realistically resurrected into 21st century mixed-use developments without diminishing their essential historic character.

The Tippins are intensively engaged with:

• Starting this year to restore and rebuild the Exchange Palace, the former stock exchange building in downtown Budapest, and operating its new high-tech underground parking garage acquired from Austrian owners
• Redeveloping a decommissioned portion of the international airport in Tbilisi, Georgia, after acquiring the aviation assets of former national carrier Georgian Airways including a terminal building, hangars, a weather tower and an informal museum of old airplanes that have taken their last flight, including a Russian Yak 40 jet.
• Building underground parking in traffic-clogged downtown Yerevan, the Armenian capital
• Turning East Berlin’s former Humboldt electrical transformer station, a sprawling brick complex with high ceilings, open spaces and winding corridors, into an arts/cultural/fashion/restaurants/bars kind of destination.

"It’s the coolest edgy, bohemian neighbourhood in Berlin," says Tippin, "and the centre of arts, like Yorkville used to be."

It all fell into place not long after the Tippins sold their Toronto portfolio. An Israeli business associate told Tippin the Exchange Palace, the 500,000-square-foot one-time home of the Budapest Stock and Commodity Exchange, was for sale.

Never one to let an opportunity slip by, Tippin immediately flew to Hungary to have a look. What he saw – and especially foresaw – stirred acquisitive feelings he hadn’t experienced for a long time.

Tippin sent a photo of the building to Brian Rovell, director at New York’s Newmark Knight Frank, one of the world’s largest independent real estate service firms, and a co-owner with Tippin Corp health insurance plans. of the Flatiron Building in Manhattan.

Was the Exchange Palace "worth going after," Rovell recalls Tippin asking. "I couldn’t believe it was for sale and advised him to look it over."

Tippin, who had never set foot in Hungary before and didn’t speak the language, had hired multi-lingual Hungarian and Russian staff for company headquarters set up in an historic building in downtown Budapest.

"That’s what makes him different from most developers," says Rovell. "He doesn’t rely on low-level acquisition guys running around looking for deals, or big-time guys from a big real estate company who fly into a city and fly out the same day.

"He called me from the front of the building and said `You’ll never believe this…’ and we went from there."

It took about a year for Tippin and his investment partners – including U.S. Ivy League endowment, pension and private equity funds – to clinch the sale of the Exchange Palace for $22.5 million (U.S.).

The building, erected in 1905, is currently occupied by the state television network, which is preparing to move this summer into a complex in suburban Budapest. That will leave the Exchange Palace vacant for a total renovation designed by Beyer Blinder Belle Architects and Planners LLP. The New York firm specializes in this scale of historic renovation, and has worked on the Empire State Building lobby and Rockefeller Center.

The redevelopment plan, estimated at more than $100 million (U.S.), calls for retail shops and cafés facing Szabadság tér, or Freedom Square, a boutique hotel and spa, office space on the middle floors and bi-level luxury apartments above that, with outdoor terraces overlooking the Buda hills across the River Danube and toward the nearby Parliament buildings.

Time may well be on Tippin’s side.

It will take at least two years to complete the resurrection of the old pile by the Danube – time for Hungary’s troubled economy and political uncertainty to settle down. But it has a long way to go. The Hungarian forint collapsed last year, making foreign-denominated loans difficult to repay. A financial bailout by the European Union was rejected and the national economy is estimated to shrink by up to 6 per cent this year. And Prime Minister Ferenc Gyurcsany resigned last month amid criticism of his handling of the financial crisis.

If the global recession doesn’t break up for another year, Tippin may have difficulty finding a hotel operator and buyers for the Exchange Palace condos. Office and retail tenants could also be scarce, or capable of driving down rents and lease terms with strong bargaining.

Given its location, grandeur and upcoming makeover, the Exchange Palace is almost certain to work, though it might have to wait.

"If you’re in the right place with the right price, you will make money," says Tippin. "The real trick is to know the difference between a good deal and a bad deal."

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Research In Motion Ltd. has taken another page out of Apple Inc.’s playbook with the launch of a mobile website featuring a catalog of BlackBerry specific applications that can be downloaded to users’ devices.

Just as the BlackBerry Storm’s touchscreen mimicked the iPhone, RIM’s BlackBerry App World attempts to capitalize on the success enjoyed by Apple’s App Store by offering a collection of applications made by developers for free or for purchase.

RIM said the site’s contents, which range from applications like video games designed for handheld devices to social networking tools, are available immediately to BlackBerry subscribers in the United States, United Kingdom and Canada, with launches in other countries to follow.

Subscribers whose BlackBerrys are equipped with a track ball will be able to download the applications directly from their wireless devices.

"BlackBerry App World provides a fantastic new resource for consumers and an equally exciting progression of business opportunities for our developer and carrier partners," said Jim Balsillie, RIM’s co-CEO, in a statement free business cards.

"We are launching BlackBerry App World with a solid selection and we look forward to working with our partners to continue delivering the types of apps that best suit our customers’ personalized needs and interests."

RIM said it expects approximately 1,000 applications to be posted by partners on BlackBerry App World this week, including applications from Bloomberg, Lonely Planet, the New York Times and other well-known brands.

By contrast, Apple’s App Store boasted about 15,000 applications as of January.

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EDMONTON–The G-20 powers meeting in London this week should take an approach to financial regulation reform that looks at the system as a whole and the interaction between banks and markets, Bank of Canada Governor Mark Carney said Monday.

In the prepared text of a speech he was delivering in Edmonton, Carney said global policymakers seeking to prevent financial crises should extend regulation to all financial activities that can pose a systemic risk.

"We are stressing the need for a macroprudential (i.e., comprehensive and system-wide) approach that takes into account the importance of banks, markets, and the interactions between them," Carney said.

"This will include pools of capital of material size, leverage and maturity mismatches," he said.

In the short term, extraordinary liquidity provided by central banks has helped keep markets functioning, but it is not enough in the long term. Countries must take a series of measures to improve market infrastructure and other fundamental reforms, he said.

Carney warned against what he called financial protectionism, the result of large global banks and hedge funds cutting back their international activities due to the crisis as well as bailouts. He said this trend, if unchecked, could be a setback for the global economy and permanently impair cross-border capital flows instant cash advance.

It is unlikely cross-border financial flows will return to pre-crisis levels after the current crisis passes, he said.

Carney said the "shadow banking system" – comprised of investment banks, finance companies, mortgage brokers and others – has moved faster than the regulated banking sector to reduce assets and raise capital in response to the crisis.

"We estimate that to bring leverage ratios down to Canadian levels by raising capital alone, global banks would need more than US$1 trillion in new capital, before any additional writedowns on assets," he said.

At the same time, Carney warned against overreacting to bank failures by forcing traditional banks to return to their traditional functions of mere deposit-taking and lending and away from interdependence with broader financial markets.

This would be impractical because banks have become major market players and financiers of global trade.

"A better approach is the plan by the G20 to expand the perimeter of regulation" to include nonbank players, he said.

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