Despite its close connections to the struggling economy of the neighbouring United States, Canada has weathered the global economic crisis better than most countries. The Parliamentary Secretary in Canada’s finance ministry explains why a combination of careful regulation, prudent financial management and targeted stimuli including tax reductions has kept Canada in a strong economic position.
Ms Shelley Glover,
MP, in Ottawa. Ms Glover is the Parliamentary Secretary to the Minister for Finance. A former police officer, she has been a Conservative Member of Canada’s House of Commons since 2008. She served previously as Parliamentary Secretary to the Minister of Indian Affairs and Northern Development and as Parliamentary Secretary for Official Languages.
Canada is a key leader in ongoing efforts to build a better financial future for citizens worldwide by helping to promote a more stable and resilient global economy. Much has been written about how our country weathered the most synchronized global downturn since the 1930s. As countries around the world confront the challenges facing the global economy, it may be useful to provide some insight into Canada’s experience and actions. While Canada’s economy was side-swiped by the global recession, we are recovering better than most. Fortunately, we had a lot of advantages that mitigated the impact on our country.
Stable housing sector For example, we have a strong and stable housing sector that is quite different from the situation in many other countries. There are several factors, in fact, that set Canada apart.
First of all, we don’t have mortgage interest deductibility. We don’t encourage using tax policy to
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increase risk in the housing market. Secondly, we have recourse mortgages in Canada. This helps instil a sense of responsibility and discipline among homebuyers. Thirdly, we have very prudent lending standards, reflecting both solid management practices and strong supervision. Fourthly, our originators, for the most part, hold the mortgages that they grant. And finally, we monitor the housing market constantly and very carefully.
Indeed, the government has intervened three times in the past three years to tighten the rules for our insured mortgage market. For example, earlier this year Canada reduced amortization periods, increased mandatory down payments and lowered the maximum loan-to-value ratio on refinancing. Canada’s lenders demonstrated responsibility and restraint throughout the global downturn. As a result, Canada did not suffer a single bank bailout or failure.
Equally important, and unlike the situation south of our border in
Ms Shelley Glover, MP
the United States, there was no notable change in the rate of payment delinquency among homeowners. Paying one’s mortgage is a strong Canadian character habit.
Sound financial sector For the fourth year in a row, the World Economic Forum rated Canada’s banking system as the best in the world. More recently, five Canadian financial institutions were named to Bloomberg’s list of the world’s strongest banks, more than any other country. Canada’s financial system is