Canada increases scrutiny of housing agency, bonds
By Louise Egan
OTTAWA (Reuters) - In an effort to cool the heated housing market, Canada plans to have its bank regulator oversee the federal housing agency's commercial activities and tighten rules governing the fast-growing market for covered bonds.
In legislation introduced on Thursday, Finance Minister Jim Flaherty said he was giving the bank watchdog, 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 property market and create financial instability.
Set up after World War Two to address a housing shortage, CMHC has since become the country's biggest seller of mortgage insurance and a major provider of mortgage-backed securities. But its financial transactions were not formally subject to the same regulatory scrutiny as those of major banks.
"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." Continued...