The economic literature clearly points out that exposure to credit risk should be left primarily to those actors who have the best information on counterparty risk, namely, shareholders and debt-holders, hence the new capital requirements and the bail-in rules. Let me note however that inducing greater monitoring efforts is a necessary, but not a sufficient condition to mitigate excessive risk-taking.
That’s why Canada is investing in the skills and knowledge of our people, and is creating a competitive environment through lower taxes that encourage investment in physical capital and reward the efforts of entrepreneurs. These flexibility-enhancing policies, along with lower barriers to trade, smart regulation and openness to international investment, are the building blocks of Canada’s modern and prosperous economy.