Thank you very much. You are right, as usual. These are extremely important issues for the financial stability of both the world and Canada.
With respect to asset-backed commercial papers, I believe that reforms have been made in the area of standards and security rules for securitization. These reforms will probably take place in a few months time in
money market funds
because they represented the largest investors in such products. To some extent, they no longer pose a problem to financial stability. Nevertheless, over-the-counter products do still represent a tremendous problem for the system. We must continue pursuing the reforms that we started implementing a few years ago.
May I switch to English?
There are three aspects here.
Very quickly, there's transparency where there's been a lot of progress. Canada is in the process of setting up a trade repository. That will help with transparency. In my role at the FSB we've written to all FSB members to ensure they all do the same thing. That's the first point.
The second point is how these products are cleared. The plumbing of the system takes out a lot of risk. There's something called the central counterparty, which ensures that instead of the relationship being directly bilateral between two institutions, it has a central counterparty that ensures that if one of those institutions fails, the other institution can keep going. The Canadian authorities, federal and provincial, have taken a decision to centralize Canadian derivatives-clearing in London for interest rate swaps. This is a hugely important decision, and it will substantially reduce the risk from that in a very efficient way for Canadian institutions.
The third point is a series of rules that regulate cross-border derivatives. If it's a trade between an institution in Montreal and an institution in Europe, two sets of rules potentially apply to that transaction. We need to harmonize those rules to ensure the transactions can be in place. There have been a series of meetings to ensure that. Canadian authorities,
The financial market authorities and
the Ontario Securities Commission, have been involved in those meetings. Through the FSB we're helping to push that along. We had a series of meetings over the course of this past weekend to ensure that meaningful progress is being made on this front. We're trying to bring a number of these reforms to a head by the St. Petersburg G-20 summit in September.
I'd say there's meaningful progress. I would welcome the continued interest of this committee in this issue. It's very complicated, but all the pieces of the reforms have to be put in place for the true, large elements of risk to be substantially reduced in this important market.