Finance committee  Yes, and we set those rules internationally. Those capital rules were based on complexity, and they're going up again. That was in the backgrounder I issued in April. The Basel Accord is going to be amended again because as regulators we have seen there is still not enough capital for some of these complex products.

Finance committee  I was referring to the assessments that have been done of the market. The rating agencies had views, and there were others who commented on the market. We would be at conferences as well. Up until August, the market had been working well, with a lot of sophisticated investors willing to put money into it in significant amounts.

Finance committee  We usually don't go out and talk about that at great length. That's something a lot of parties obviously talk about. From where I sit, I usually just talk about my own experience. Certainly I am one person sitting here, not 13 people. So I think there is probably more accountability with one regulator than with 13.

Finance committee  Well, internationally, this is not the only product that failed to perform. Many products that were rated by various rating agencies failed to perform. That's point number one. Second, what I've certainly learned is that whenever you see rating agencies disagreeing, it's time to pay attention.

Finance committee  Could you elaborate on what you mean by priorities?

Finance committee  We do work together. We each have our own role, but we do meet together as a group. The Bank of Canada chairs meetings, and we meet with the securities commissions and the Department of Finance. We will, on occasion, invite the IDA, now IIROC, and talk about what each regulator is doing and how we're addressing these problems.

Finance committee  On the first one, concerning investors, in my role we're interested in depositors. If you put your money in a bank deposit--an RRSP, a GIC--and the institution is a member of CDIC, and all banks must be members, then you're protected up to $100,000. That's where my role ends. But it is obviously an important issue, particularly when unsophisticated people end up with something they perhaps shouldn't have.

Finance committee  I think DBRS should talk about exactly what it did. I noted in all of my speeches and backgrounders that they believed the risks were balanced because they had a general market disruption liquidity line, but they had better enhancement in the vehicles. That's what they've said, but they could give you more information on that.

Finance committee  I know the securities regulators across Canada are looking at the operation of the exempt market as it pertains to asset-backed commercial paper. The big issue here is that asset-backed commercial paper was sold without a prospectus because it was in the exempt market. The security regulators are looking at that and whether anything needs to change in that regard.

Finance committee  Are the rating agencies playing a role?

Finance committee  There are a lot of things here. Not only banks sold the products; we know that. I don't know all the details here, but banks can act in different ways as fiduciaries, in which case they have an obligation, if they are giving advice, to know the product and the client. That is what the securities commissions and the IDA would be looking at.

Finance committee  We need all the facts first before we talk about making my mandate broader, because other regulators are still doing their work. We need to see what the Investment Dealers Association, now IIROC, come up with. They said they will tell people what the findings are. We need to see what the securities commissions do with the exempt market and its definition.

Finance committee  I think when you look at the 17 years preceding August, this market had worked extremely well. We knew there was a debate, and that was a very public debate. We've seen the reports that various rating agencies prepared and issued. DBRS was issuing reports. Other reports were being done.

Finance committee  The first thing to note, just so that everyone is clear, is that the general market disruption liquidity lines, B-5, which set out a zero capital requirement, did not apply to Coventree or the non-banks at the heart of this issue. What we talked about in our background was that in 1988 or so, regulators around the world had set a zero capital charge for any type of liquidity line under one year.

Finance committee  That would not be true from a bank regulator's perspective. From a bank regulator's perspective, you have to have capital if you take risk. The banks were not taking much risk with those liquidity lines. When you look at what happened globally, asset-backed commercial paper vehicles globally started to have a problem even with global lines.