Today, in efforts to "[m]aintain the availability of longer-term credit in Canada," the Canadian Department of Finance announced that the Government will purchase up to an additional $50 billion of insured mortgage pools by the end of the fiscal year. This recent Government action increases the value of securities purchased to $75 billion, all as part of aprogram originally announced by the Department of Finance on October 10 to purchase insured mortgage pools from Canadian lenders through the Canada Mortgage and Housing Corporation.
The Government further announced its plans to reduce the base commercial pricing of the newly created Canadian Lenders Assurance Facility by 25 basis points (to 110 basis points), and waive the 25 basis point across-the-board surcharge for insurance provided under the Facility until further notice, so as to make the Facility "more competitive with similar programs offered in other countries." Currently, the amount of assessment attributable to debt guaranteed under the FDIC's Temporary Guarantee Liquidity Program, as issued under the FDIC Interim Rule, is an annualized 75 basis points.
Finally, Canada's Office of the Superintendent of Financial Institutions announced yesterday an increase, effective immediately, in the allowable limit of innovative and preferred shares in Tier 1 capital from 30% to 40% for federally regulated entities, thereby providing Canadian financial institutions with more sources of funds to support lending in Canada.
Canada appears to stand ready to take concerted action amid the global financial crisis as necessary, reiterating that the Bank of Canada "[w]ill continue to provide exceptional liquidity to the Canadian financial system as long as conditions warrant," and that the Government of Canada will "[t]ake whatever steps are necessary to ensure that Canada’s strong financial system is not put at a competitive disadvantage by developments in other countries."