They also launched a blistering attack on the banking industry with Lagarde accusing bankers of obstructing vital reforms needed to make the system safer.
'Progress is still too slow and the finish line is still too far off,' she told the Conference on
'Some of this arises from the sheer complexity of the task at hand. Yet, we must acknowledge that it also stems from fierce industry pushback, and from the fatigue that is bound to set in at this point in a long race.'
Lagarde said banks deemed too-big-to-fail 'are still major sources of systemic risk' and are backed by an 'implicit subsidy' from taxpayers of more than
'Clearly ending too-big-to-fail must be a priority,' she said. 'That means tougher regulation and tighter supervision.'
Lagarde said 'people who want to skirt the rules will always find creative ways of doing so' as she called for a change of 'culture' in the banking industry. 'Why is this so important?' she went on. 'Because the behaviour of the financial sector has not changed fundamentally in a number of dimensions since the crisis.
While some changes in behaviour are taking place, these are not deep or broad enough.
The industry still prizes short-term profit over long-term prudence, today's bonus over tomorrow's relationship.'
Carney accused bankers of operating in 'a privileged heads-I-win-tails-you-lose bubble' where taxpayer money is used to prop up the system in times of crisis.
'Perhaps the most severe blow to public trust was the revelation that there were scores of too-big-to-fail institutions operating in the heart of finance,' he told the same conference.
'Bankers made enormous sums in the run-up to the crisis and were often well compensated after it hit. In turn, taxpayers picked up the tab for their failures.
'That unjust sharing of risk and reward contributed directly to inequality but – more importantly – has had a corrosive effect on the broader social fabric of which finances is part and on which it relies.'
Carney, who heads the Financial Stability Board, a global banking watchdog, said it is time 'to restore capitalism to the capitalists by ending too-big-to-fail'. He said that would mean that if banks do fail 'they can be resolved without severe disruption to the financial system and without exposing the taxpayer to loss'.
'This is the year to complete that job,' said the Governor.
Lagarde said many of the scandals that have rocked in the industry – such as the rigging of Libor and the currency markets and cases of money laundering – 'violate the most basic ethical norms'.
'To restore trust, we need a shift toward greater integrity and accountability,' she said.
'We need a stronger and systematic ethical dimension.'
She added: 'Ultimately, we need to ingrain a greater social consciousness – one that will seep into the financial world and forever change the way it does business.'
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