An Opportunity To Comment On Canada's Covered Bond Regime

Canada's Department of Finance has published a consultation paper (the Paper) [http://www.fin.gc.ca/activty/consult/cb-os-eng.asp] which sets out a proposed legislative framework for covered bonds for federally regulated financial institutions (FRFIs) in fulfillment of a promise made by Minister of Finance Jim Flaherty in the Government of Canada's March 2010 Budget.

BACKGROUND

The recent upheavals in global markets have increased the cost of raising capital for financial institutions around the world, especially for those whose credit ratings and/or reputations have fallen. Increasing regulatory capital requirements over the next several years, the need to re-establish acceptable capital levels in the short term and declining interest in securitize loans have prompted an increasing interest in "covered bonds". While many may not be familiar with these instruments, they have a long history. They were originally issued by governments where the regime's continued