Carney told a Senate banking committee Wednesday that he believes business investment will resume in early 2011 after fiscal stimulus is withdrawn at the end of 2010.

The head of the central bank said the nature of Canada's current recovery will be unique in that it will depend more on government-stimulate domestic consumption and less on companies producing and exporting products.

Government stimulus will add about one per cent to gross domestic product next year, one third of the growth projected by the bank, he said.

"(But) once government stimulus is withdrawn, the bank expects at the beginning of 2011 that corporate investment, private investment will increase," he said.

"Overall, there will be a subdued recovery, but there will be a recovery."

As he said last week, Carney stressed that governments must demand that the world's major financial institutions build up capital reserves to the levels already practised in Canada.

But he said financial regulatory reform will also be necessary in Canada, saying Finance Minister Jim Flaherty is looking into formalizing a committee, of which he is a member, to oversee the wider economy and financial sector.

And he said new rules are coming to create capital buffers to ensure banks are encouraged to extend loans during economic crises, noting that the withdrawal of credit during the current downturn exacerbated problems in the economy.