Finance committee  You can look at it week by week. They've come down for Canadian banks and a bit for all banks, but it does change from week to week.

Finance committee  I think in Canada and around the world there continues to be aversion to taking risk. Investors continue to be concerned about risk and they're being very careful in terms of what they invest in. The Canadian bank ABCP market continues to perform, though certainly not as well as it did prior to the global market turmoil beginning in the summer of 2007.

Finance committee  I can't really talk about the plans that OSFI doesn't oversee. We oversee 10% of the private pension plans in Canada, and the provinces oversee 90%. I do know that the 10% we oversee have very conservative investment strategies.

Finance committee  I'm not necessarily referring to the risk of the instrument; it's the investor's perception of the risk.

Finance committee  I think the governor and I are on the same page. We have different mandates. The Bank of Canada obviously has a broader mandate over the whole economy. Our mandate is safety and soundness of financial institutions, banks, and insurance companies. The interesting feature we have seen is that the market has really been pushing up capital levels, not regulators.

Finance committee  Thank you very much for inviting me. The Office of the Superintendent of Financial Institutions is the main agency responsible for supervising and regulating deposit-taking institutions, insurance companies and federally regulated private pension plans. The current economic situation will challenge all financial institutions, both around the world and here in Canada.

Finance committee  What we saw was that instead of transferring the risk to investors, banks stepped in and supported the conduits, and when you do that, you cannot justify a zero percent charge. The zero percent charge made sense when banks had transferred risk to investors. It did not make sense when banks, for the first time ever, stepped in to support these conduits.

Finance committee  Ninety percent of the banks we're talking about were foreign. Ninety percent of the banks--Coventree, etc., the non-banks--typically dealt with foreign banks that are not subject to my rules. It was those foreign banks that had the bulk of the liquidity lines. It was those foreign banks that declined to provide the bulk of liquidity, according to the agreements they had with Coventree, and Coventree was free to choose any liquidity line.

Finance committee  When they take deposits here, yes, but if a car company, a grocery company, or a Coventree wants to deal with a foreign bank, I think they should be allowed to do so. Those foreign banks have regulators, and they are regulated for solvency.

Finance committee  I'm not aware of any. I don't know if there are others.

Finance committee  I don't think in Canada, but in other markets, yes.

Finance committee  I would put it in a different way. The whole world agreed to zero for any liquidity line of less than one year. As a bank regulator, we started to get very worried about that. You have to have capital if you're taking risk. We went to our international colleagues and said that there must be capital; banks are taking risks in providing these liquidity lines without any restriction to conduits.

Finance committee  Both regulatory organizations in Canada and the U.S. in 2004 implemented an additional capital charge because we saw a risk being taken, and that was for the global-style lines. Our OSFI rules applied to our banks no matter where they operated. When they operated in the U.S., they offered global lines, because that was the only line that investors and rating agencies would accept in the U.S.

Finance committee  Well, my job is to protect bank depositors. Those are life savings; I treat it quite seriously.

Finance committee  Around the world, it was clear that with low interest rates investors were searching out new products that offered higher yield. Again, this market worked well for 17 years in Canada, and I think as long as sophisticated investors continued to put money in it, as long as the securities were rated triple-A, it continued to drive the market and investors as well.