TEXT-Speech by Bank of Canada Governor Carney

OTTAWA, June 18 (Reuters) - Following is the prepared text of a speech by Bank of Canada Governor Mark Carney to the Regina & District Chamber of Commerce in Saskatchewan.

It is a pleasure to be back in Saskatchewan. This great province has been one of the fastest-growing parts of the country in recent years, benefiting from increasing diversification into biotechnology and alternative energy, among other industries.

Today, I will refer to the traditional backbone of this economy: agriculture. I do so because lately there has been much talk of "green shoots" in the global economy. From the initially careful references to data that suggested a slowing of the rate of decline in global activity, the use of the term "green shoots" has quickly evolved. Some now refer to green shoots as if the global recovery is a foregone conclusion or even as if sustainable growth had already begun.

Would that it were so easy. Saskatchewanians know that it is a long, anxious time between the appearance of seedlings and the harvest. Much hard work remains, and external forces can profoundly influence the outcome: too little or too much rain, hail, pests, and disease can all frustrate even the most promising beginnings. And, in the end, global forces of supply and demand determine the prices received. Old adages usually contain great wisdom: Just as you don't count your chickens before they are hatched, we shouldn't presume that green shoots today guarantee a bumper crop tomorrow. Financial Stability and the Bank of Canada

I want to extend this analogy to provide some perspective on recent developments in Canadian financial stability. Financial stability is the resilience of the financial system to unanticipated adverse shocks. This resilience determines the extent to which Canadian households and businesses have access to the credit they need at appropriate terms and conditions.

While our financial system is one of the soundest in the world, the ferocity of the once-in-a-lifetime global financial tempest has affected all Canadians, regardless of their location or occupation. So, does our financial system still leave us well positioned for our green shoots to mature into a viable crop of summer wheat?

The Bank of Canada is well placed to make this judgment. As part of our commitment to promote the economic and financial welfare of Canada, the Bank actively fosters a stable and efficient financial system. The Bank constantly assesses the major risks to the soundness of our system, and helps to develop policies to mitigate them. In essence, we worry not only about prospects of external shocks (the equivalent of weather or crop prices), but also about the buffers that our banks, businesses, and households have (the equivalent of the financial reserves farmers need to carry in case the harvest disappoints).

Twice a year, the Bank publishes its Financial System Review, or FSR-the most recent edition appeared earlier this week. My talk today will draw on that analysis and assessment. I will concentrate on three risks, in particular: 1) the liquidity and funding positions of our banks, 2) the adequacy of their capital, and 3) the financial health of Canadian households. I will conclude with a few observations on the economic outlook. Assessment of Overall Financial Stability

Since the autumn, the global economy has been in a deep and synchronized recession that was triggered by the worst financial crisis since the Great Depression. In recent months, financial market conditions have improved noticeably and further, gradual progress is likely as numerous international policy initiatives gain traction. Equity markets have seen strong gains in recent months, and credit markets have also rallied. While there is still a long way to go before economic and financial conditions return to normal, markets seem to be turning their backs on worst-case scenarios. The panic that engulfed global financial markets last fall is over.