(Adds comments from finance minister, Poloz quotes)
By Randall Palmer and Leah Schnurr
OTTAWA, Dec 15 (Reuters) - Canada's government still has measures in its arsenal to reduce housing market risks if necessary, the head of the Bank of Canada said on Tuesday, though the country's finance minister said there were no new plans in the offing for now.
Canada's housing market has been a source of concern as prices and consumer debt levels continue to climb, driven by years of low interest rates. After two rate cuts this year in response to cheap oil, the Bank of Canada has faced criticism it risks fueling the hot housing market.
The bank in its financial system review on Tuesday said vulnerabilities in the housing sector have edged higher, though last week's government measures to cool the sector mean the system is better able to handle any troubles that may arise.
Asked whether there was a range of good options left for adjusting housing policy after a handful of steps in recent years, Bank of Canada Governor Stephen Poloz said there are "quite a number" of ways the rules could still be changed, though he did not elaborate.
The bank has maintained it is the last line of defense against risky household debt. The newly elected Liberals last week said they were increasing the downpayment required for expensive homes, a move that is expected to affect a small portion of the market.
For his part, Finance Minister Bill Morneau said the government was not considering doing anything more at this time.
"We'll stay closely focused on the housing market and pay close attention to Canadians' level of indebtedness and if there's anything else that we think is the right thing to do, we'll come back to Canadians with that information," he said.
The bank's review continued to list two key vulnerabilities related to the household sector: high household indebtedness and imbalances in the housing market.
Still, Poloz predicted a constructive evolution of housing imbalances, while the overall risk level to Canada's financial system was deemed to be roughly unchanged since the bank's last report in June.
Poloz said it was welcome that there are targeted measures that can address pockets of vulnerabilities in the housing market without using blunt instruments.
The review said a severe recession with high joblessness could cause major stress on the financial system because housing prices would fall and households would be less able to service their debt, but the probability of this occurring remained low. (Additional reporting by David Ljunggren; editing by James Dalgleish and Andrew Hay)