April 12, 2008 at 1:02 PM EDT
Federal Finance Minister Jim Flaherty signalled that provincial
securities regulators deserve blame for the collapse of Canada's
asset-backed commercial paper market, and said they and the firms they
oversee will be will be subject to scrutiny as he pushes Canada's
financial services industry to upgrade its standards.
"The financial institutions aren't just the banks,'' Mr. Flaherty told
reporters in Washington, where he is attending a meeting of the
185-member International Monetary Fund.
"We had various entities selling asset-backed commercial paper to
people. We have a number of investors in Canada who feel they have not
been well treated and didn't know what they were buying, or were misled
on what they were buying and have been through a difficult process...So
we need to look at those institutions as well and who's regulating them
and are they disclosing properly and is their due diligence being done
by them with respect to the products they are selling.''
The market for third-party ABCP ground to a halt in August after
investors were spooked by its potential exposure to the U.S. subprime
mortgage market, leaving the holders of the paper with $32-billion of
potentially worthless assets.
Mr. Flaherty and his counterparts in the Group of Seven countries
yesterday pledged to take a series of steps within the next 100 days
aimed at restoring confidence in the financial system.
Canada's finance minister said yesterday that he would assemble Canada's
banks within the next couple of weeks to go over the G7's expectations,
which include a commitment from lenders to disclose their exposure to
complex assets such as securities backed by risky subprime loans.
Mr. Flaherty is using the G7's push for better financial regulations to
back his lobby for a single national securities regulator, suggesting
today that the ABCP mess might have been avoided had there been one
overseer of the securities industry rather than 13.
"There's no confusion, it's the provincial securities regulators,'' Mr.
Flaherty said when asked if there was uncertainty over who was
responsible for the ABCP market. "We have the banks of course, but the
banks were only part of that process and most of it was relegated to
entities that are under the supervision of provincial securities