My name is Jean-François Bertrand and I am senior vice-president of capital markets with GE Capital Canada.
In order to explain how the credit crisis has affected us, it is important for you to understand how we finance our Canadian operations. GE Capital Canada issues unsecured commercial paper, medium term notes and asset-backed commercial paper. Some of this is issued in Canada and some on international financial markets.
The current crisis has reduced our ability to raise funds. The market in asset-backed commercial paper is down 55%, or $63 billion, since 2007. Rates for this paper are extremely volatile. The cost of issuing secured commercial paper has become prohibitive.
The market for unsecured financial corporation commercial paper is also affected, dropping 45%, or $20 billion, since 2007. GE Capital Canada's ability to issue unsecured commercial paper has dropped significantly since July 2008. Since 2003, GE Capital Canada has issued almost $15 billion in medium term notes since 2003, but we have issued none since July 2008.
With the dramatic drop in traditional sources of local financing, GE Capital has had to make use of cross-border intercompany loans in order to meet the needs of its Canadian clients. Unfortunately, long-term use of loans of this type is not sustainable because of the Canadian tax rules to which they are subject.
Loans from our American affiliates are subject to what are known in Canada as thin capitalization rules. These rules limit deductions for interest on money borrowed from American parent companies to a two to one leverage ratio, making this a very costly source of financing. By comparison, Canadian banks typically have what is considered a conservative leverage ratio ranging from 16 to one to 20 to one.