Canada Limits Banks from Using Insured Mortgages as Capital
This article is for subscribers only.
Canada is reducing commercial banks’ ability to use insured mortgages as balance-sheet capital, according to budget documents released today.
The move, designed to limit risks to taxpayers from weakness in the housing market, aims to restrict the amount of so-called portfolio insurance -- government protection on mortgages with more than 20 percent equity -- that banks can hold on their balance sheets. The government is also seeking to ensure the insured loans flow into products securitized by Canada Mortgage & Housing Corp, the federal housing agency.