Canada’s banking regulator said it plans to boost oversight of mortgage insurers over the next three years as part of efforts to monitor emerging risks that may affect federally regulated financial institutions.
The Ottawa-based Office of the Superintendent of Financial Institutions, in a “planning and priorities” document released on its website, said it will also produce a report for the finance minister on “certain matters” related to Canada’s mortgage insurance guarantee framework.
“Elevated household debt levels not only make households vulnerable to adverse shocks but continued low interest rates could encourage even higher household indebtedness,” OSFI said in the planning document.
Policy makers, including Finance Minister Jim Flaherty, have said some housing markets are overheated and some people are taking on debts that will be unaffordable when interest rates rise.
Consumers “could become a source of negative domestic influence if they take action to rein in spending to address their indebtedness,” OSFI added in its report.
The regulator also said it will work to identify “emerging macroeconomic and financial-sector risks” in areas including residential mortgage portfolios.
A spokeswoman for OSFI, Leonie Roux, said the regulator’s report would apply to private insurance providers such as Genworth MI Canada Inc. (MIC) and not Canada Mortgage & Housing Corp., a government agency. CMHC is responsible for about 70 percent of mortgage insurance in Canada.
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