01 November 2008

Statement by the Minister of Finance on the Upcoming G7 Meeting

Yesterday the Prime Minister and I met to discuss international co-ordination of the global financial crisis. The IMF has just released a report urging co-ordinated action concerning the world financial crisis. I strongly endorse this call.  

The Honourable Jim Flaherty, Minister of Finance, today issued the following statement:

"Yesterday the Prime Minister and I met to discuss international co-ordination of the global financial crisis.

"The IMF has just released a report urging co-ordinated action concerning the world financial crisis. I strongly endorse this call.

"I have been in regular contact with the G7 Finance Ministers, and my officials have been in daily contact with their counterparts. I will be meeting with my G7 Finance Minister colleagues on Friday, in Washington.

"Governor Carney and the Bank of Canada have responded to the turmoil in financial markets by increasing the availability of term liquidity to the Canadian financial system. The Bank has increased to $20 billion the term liquidity it will provide banks and has widened the range of collateral it will accept, using the expanded powers provided through the 2008 budget legislation.

"This morning, the Bank of Canada joined other major central banks in a simultaneous reduction of policy interest rates by 50 basis points. This significant action will provide timely support for the Canadian economy.

"I welcome the strong international co-ordination that central banks have displayed throughout the financial crisis, most clearly expressed in the co-ordinated rate cut today. The same commitment to co-operation needs to be reflected by Finance Ministers.

"With that in mind, our goals at the upcoming meeting will be:

• to make further progress on a co-ordinated agenda to address ongoing turbulence in the financial markets;

• to ensure that our actions—like those of central banks—continue to be co-ordinated; and

• to support the continued, and accelerated, implementation of the recommendations of the Financial Stability Forum such as:

• a central clearing mechanism for over-the-counter credit derivatives;

• accounting and disclosure standards for off-balance-sheet activities and related risks; and

• a set of international principles for deposit insurance.

"Given the continuing turbulence, I believe that Finance Ministers should meet again in the coming weeks to ensure continual progress.

"The Government of Canada also supports the idea put forward by President Sarkozy of a leader’s summit to review measures to strengthen the international financial system.

"We intend to work with our partners in the coming days to help set the agenda and workplan in a way that will allow such a summit to be productive and meaningful.

"This morning, the IMF released its updated World Economic Outlook. While they predict that Canada will lead the G7 in growth in 2009, the significant downward revision in global growth shows that all countries are facing challenging times.

"Canada is in a strong position to deal with this global crisis. We continue to maintain a budget surplus.

"Canada’s banks and financial systems are sound and well capitalized and are less leveraged than their international peers.

"Our financial system is strongly regulated and our mortgage system is sound. The Canadian mortgage market does not have a significant sub-prime component—which has been a large part of the serious problems being experienced in the United States. We announced additional steps this summer to further protect and strengthen our housing market.

"The G7 has always been an important forum for sharing best practices. Given the resilience of the Canadian financial system in the crisis, I will be highlighting how our approach—to the supervision of financial institutions, to deposit insurance and to mortgage finance—has served us well.

"But no country is immune to the ongoing turmoil facing global credit markets.

"As the Prime Minister and I discussed yesterday, we have taken a number of actions that have allowed us to weather the storm better than most G7 countries up until this point.

"We know that investors, pensioners and all Canadians are concerned with what they are seeing on world markets. They are concerned about the spillover effects into Canada that we are seeing in our stock markets and economic growth. I share those concerns.

"That’s why we will continue to take strong action with prudent decisions and policies, and will take any additional measures that are necessary to ensure that we can navigate through these turbulent waters.

"I look forward to working with the other Finance Ministers of the G7 and the IMF to strengthen the world economy, attempt to re-instill confidence in the global financial system and act to alleviate the credit crunch that economies around the world are facing."