The Financial Stability Board expressed concern Tuesday about high levels of household debt in Canada leaving the country's financial system vulnerable to an economic downturn.
"Households are reporting increasingly high levels of indebtedness," the international financial supervisory and regulatory body warned in a study of the country's financial situation.
According to the report household debt as a share of disposable income hit a "record high" of 144 percent last year.
While household debt in the United States and Britain has gone down since 2009 following the financial crisis, it has to rise in Canada. In 1990 it stood at 85 percent of disposable income.
Though current levels of bank loan losses are low at 0.3 percent, the advent of a "macroeconomic shock" such as a recession could hamper householders' ability to service their debts, the Basel-based FSB said.
This in turn could impact negatively on the housing market and trigger an effect across the financial system, it warned.
"To address these risks, the authorities should continue to strengthen macroprudential surveillance and consider expanding the range of tools at their disposal," the FSB said.
In its report the body, set up in the aftermath of the 2008 financial crisis to coordinate global bank regulations, also backed a plan to introduce a national securities watchdog.
The endorsement follows that of the International Monetary Fund (IMF) and the Organisation for Economic Development (OECD), but the plan in its current form was rejected by the Canada's Supreme Court in December.
"Establishing a single national securities regulator would bring clear economic benefits -- a simpler regulatory infrastructure, easier coordination and information sharing in the event of market distress, and improved cross-border cooperation," said the FSB in a report.
Prime Minister Stephen Harper's government asked the Supreme Court to rule on the constitutionality of its proposed Canadian Securities Act after it was opposed by at least two of 10 provinces that claim jurisdiction over financial markets.
After the legal blow he said ministers would review the decision and "act in accordance with it."
The FSB is currently chaired by Bank of Canada governor Mark Carney.
yahoo.com
"Households are reporting increasingly high levels of indebtedness," the international financial supervisory and regulatory body warned in a study of the country's financial situation.
According to the report household debt as a share of disposable income hit a "record high" of 144 percent last year.
While household debt in the United States and Britain has gone down since 2009 following the financial crisis, it has to rise in Canada. In 1990 it stood at 85 percent of disposable income.
Though current levels of bank loan losses are low at 0.3 percent, the advent of a "macroeconomic shock" such as a recession could hamper householders' ability to service their debts, the Basel-based FSB said.
This in turn could impact negatively on the housing market and trigger an effect across the financial system, it warned.
"To address these risks, the authorities should continue to strengthen macroprudential surveillance and consider expanding the range of tools at their disposal," the FSB said.
In its report the body, set up in the aftermath of the 2008 financial crisis to coordinate global bank regulations, also backed a plan to introduce a national securities watchdog.
The endorsement follows that of the International Monetary Fund (IMF) and the Organisation for Economic Development (OECD), but the plan in its current form was rejected by the Canada's Supreme Court in December.
"Establishing a single national securities regulator would bring clear economic benefits -- a simpler regulatory infrastructure, easier coordination and information sharing in the event of market distress, and improved cross-border cooperation," said the FSB in a report.
Prime Minister Stephen Harper's government asked the Supreme Court to rule on the constitutionality of its proposed Canadian Securities Act after it was opposed by at least two of 10 provinces that claim jurisdiction over financial markets.
After the legal blow he said ministers would review the decision and "act in accordance with it."
The FSB is currently chaired by Bank of Canada governor Mark Carney.
yahoo.com
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