Canada bank watchdog to take role in housing market

Thu Apr 26, 2012 12:15pm EDT
 
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By Louise Egan

OTTAWA (Reuters) - In a further effort to prevent the housing market from getting overheated, Canada's bank regulator will oversee the commercial activities of the federal housing agency under legislation introduced by the government on Thursday.

In announcing the legislation, Finance Minister Jim Flaherty said he was giving the bank regulator, the Office of the Superintendent of Financial Institutions (OSFI), the job of making sure that the Canada Mortgage and Housing Corp (CMHC) doesn't stoke an already hot market.

"I've been concerned about the CMHC for some time in the sense that it's become an important financial institution in Canada, and it was not subject to the same supervision by the Office of the Superintendent of Financial Institutions," Flaherty told a news conference.

"So I think this is an important step forward."

Flaherty has tightened mortgage rules three times since 2008 to try to reduce the risk of a housing bubble, and declined to say if Thursday's regulatory move marked the end of his interventions.

"We watch the market closely, and I particularly watch the condo market in Vancouver, Toronto and to some extent in Montreal as well," he said.

"We continue to monitor the housing and mortgage market and we will take action as necessary."

The bill also provides a legislative framework for covered bonds, which are mortgage-backed securities that are sold by banks and guaranteed by the CMHC. The legislation will establish a registry for institutions that issue covered bonds and for covered bond programs.   Continued...