Agency Deems Canada's Household Debt Measures Effective, Banks Well Capitalized, Financial Systems Sound, and Budget Balancing Efforts Appropriate
February 3, 2014 -Ottawa, Ontario- Department of Finance
Finance Minister Jim Flaherty today welcomed the findings of both the International Monetary Fund's (IMF) Financial Sector Assessment Program (FSAP) report, and IMF's Staff Report for the 2013 Article IV consultation with Canada.
The FSAP report, prepared every five years, lauds Canada's financial system for successfully navigating the global financial crisis, while remaining resilient in the face of outside risks. The report also points to the strength of the Canadian economy and fiscal position, a well-functioning and collaborative financial sector regulatory infrastructure, effective and efficient supervision, and well-capitalized and profitable financial institutions as key to the sector's ongoing success.
While the FSAP report commended Canada's sound financial system, the IMF also gave a favourable review of the Canadian economic situation and policy framework in their 2013 Article IV consultation with Canada. The IMF said that it expects the Government to return to a balanced budget in 2015, noting that progress on balancing the budget was appropriate in rebuilding room to manoeuvre in recovering from the global recession.
Both reports also praised the agreement in principle between British Columbia, Ontario and Canada to establish a cooperative capital markets regulatory system as a practical way of bringing efficiency gains and managing systemic risks in capital markets. The new regulator is expected to be operational by July 1, 2015.
The Minister welcomed the assessment that Canada's financial system is healthy and that the Government's measures introduced in recent years have been effective in moderating growth in household debt, finding that these measures are helping to ensure the long-term stability of the housing market.
Both reports are available on the IMF website.
The FSAP is a comprehensive and in-depth analysis of a country's financial sector, which provides IMF member countries with an assessment of the stability of their national financial system and adherence to international regulatory standards and codes.
Canada was the first Group of Seven (G-7) country to undertake an FSAP review as part of the program's pilot phase in 1999-2000. Canada's most recent FSAP review was published on February 13, 2008. This is the first FSAP review of Canada to be published since the end of the global recession.
The Canadian regulatory authorities that participated in the review included the Department of Finance, the Office of the Superintendent of Financial Institutions, the Bank of Canada, Canada Deposit Insurance Corporation, the Financial Consumer Agency of Canada, Canada Mortgage and Housing Corporation, Statistics Canada and certain provincial insurance and securities markets regulators. Private sector participants, industry associations and academics were also consulted on various issues.
The IMF Staff Report found that:
Canada's continued progress in fiscal consolidation is appropriate.
Canada's banking system is well capitalized and profitable and has low levels of non-performing loans.
Measures introduced over the past few years have been effective in moderating the pace of household debt accumulation and cooling off the housing market.
"We thank the IMF for their comprehensive reviews, and will carefully consider the recommendations made with the goal of maintaining Canada's sound economic policies and financial sector advantage. To ensure that Canada remains well positioned to withstand any future shocks and is able to address the future priorities of Canadians, it is vital to the Government's good economic stewardship that it remains vigilant and balance the budget in 2015 to maintain Canada's economic advantage."
- Jim Flaherty, Minister of Finance
Office of the Minister of Finance
Department of Finance