Bank of Canada governor Mark Carney backs proposed new international rules that would make banks and their shareholders and creditors — not governments — pay the cost of any future financial crisis like the Wall Street money crunch that triggered the recent recession.

Carney said Tuesday that the bailout of many big banks around the world created a moral hazard that, if left unchecked, will distort behaviour and inflate costs.

Bank of Canada governor Mark Carney, shown Oct. 27 on his way to a Senate banking committee meeting in Ottawa, says banks should pay the costs of future financial bailouts. (Adrian Wyld/Canadian Press)

Speaking to the International Centre for Monetary and Banking Studies in Geneva, the central bank governor called for steps to be taken to build the infrastructure needed to help it from happening again.

"A series of concerted measures will be required to build resilient, continuously open funding and derivatives markets and to restore market discipline to financial institutions," said Carney, whose speech was released in advance in Ottawa.

"There is a firm conviction among policy-makers that losses incurred in future crises must be borne by the institutions themselves.

"That means management, shareholders and creditors, rather than taxpayers."

The United States, Britain, Germany and other governments poured hundreds of billions of dollars into their banks to save them from collapse after they suffered huge losses because of risky loans and investing in high-risk derivatives, a financial product tied to the U.S. housing market.