GE Capital Canada is clearly an important part of the financial infrastructure of Canada. We applaud the Government of Canada for the initiatives they have taken to strengthen this financial infrastructure that is so crucial to small and medium-sized Canadian businesses--the $12 billion secured credit facility, the amendments to the EDC mandate, and the injection of capital into EDC and BDC.
But more needs to be done. As with everything in the current economic crisis, good policies need to also be matched with good timing. We believe the secured credit facility needs to be operational in the second quarter of 2009 if we are to ensure that the capital will be available to finance Canadian business operations and investment.
Also, the facility should not be limited to only AAA-rated tranches. It should also be open to investment-grade tranches. Prior to the current crisis, investment-grade tranches were being purchased on the market. Recreating the normal market for all investment-grade tranches will allow financial companies like GE to extend more financing to those companies that are not AAA and are in fact the most vulnerable in the current crisis.
Secondly, we believe the Bank of Canada should target its intervention on non-bank financial companies, where the breakdown in the commercial paper market has had its greatest impact. The Bank of England's new asset purchase facility is actually an excellent precedent, as it creates new liquidity in the market, assures confidentiality, and provides a clear exit strategy to the bank.
Third, and finally, Canada should revise the current thin capitalization rules to make it easier for financial services subsidiaries of international companies to access related-party capital. The debt-to-equity ratio should be increased from a leverage of 2:1 to at least 10:1, as this would provide Canadian financing institutions access to additional capital, which, in turn, would finance Canadian companies.
Thank you.