Canada achieves medium overall compliance with international standards and codes, with a score of 54.17 out of 100 in our Standards Compliance Index. Canada's compliance in the areas of macroeconomic fundamentals and financial supervision is high. The exception is in the area insurance supervision, where no information of Canada's compliance with the new and more stringent Insurance Core Principles is available. It achieves full compliance in the area payment systems. Canada has declared its intention to gradually converge its accounting and auditing standards with international standards during the period between 2006 and 2010. In 2004, Canada enacted three new rules strengthening corporate governance in publicly traded companies, but differences in opinion remain as to the general national regime to be adopted.

Macroeconomic Policy and Data Transparency

Canada subscribed to the International Monetary Fund's Special Data Dissemination Standard (SDDS) in 1996 and met all SDDS requirements on February 19, 1999. Based on information provided on the IMF's SDDS website, Canada meets SDDS requirements for periodicity, coverage, and timeliness of data, although it does avail of the flexibility option with regards to timeliness for production index and central government operations. A 2007 report by the IMF however notes that in terms of the timeliness of data, in 2007, Canada experienced occasional short delays with certain data points. Similarly, the report notes that during 2007 Canada met the SDDS requirements for advance release calendars in most months except in November and December 2007. The SDDS website also discloses that Canada avails itself of the flexibility option with regard to advance dissemination of release calendar for the data categories central government operations and central government debt. Moreover, data is not released simultaneously to all interested parties as the press has access to data prior to other interested parties. Information on the IMF's SDDS website also shows that Canada does not meet all SDDS requirements for integrity and quality of data. The 2007 IMF report notes that in 2007 Canada did provide available information on the methodology, sources, and reconciliation of data categories that would facilitate users to assess the quality of the data. More »

According to the 2000 IMF Report on the Observance of Standards and Codes (ROSC), Canada's monetary policy transparency practice is fully consistent with the IMF's monetary policy transparency code. This evaluation is reaffirmed and further buttressed by the IMF's 2005-2008 Article IV Consultations with Canada, as well as current self-assessments by the Bank of Canada (BoC). For instance, the 2008 IMF report lauded Canada for finding creative ways to further strengthen its already enviable monetary policy transparency regime, noting that the BoC's current transparency efforts have been effective in preparing markets for recent shifts in policy stance brought about by market uncertainty due to a slowdown in the U.S. economy. The BoC publishes a wide range of reports, and virtually all are available online, including the quarterly Monetary Policy Report (MPR). The 2008 IMF report commends the BoC for increasing the discussion of risks around the forecast in the MPRs and for expanding the range of issues covered in speeches given by members of the BoC's Governing Council. However, the report also points out that the BoC does not publish minutes of Council meetings, relying instead on speeches by members to convey information to the market. The IMF states that these speeches represent a uniform Governing Council public view because they are made by the BoC governor or subordinates who report directly to him. The BoC counters that publishing minutes would have a negative impact on member candor and could jeopardize the Governing Council's composition and legal framework. More »

According to the 2006 and 2008 IMF Article IV Consultations with Canada, fiscal policy implementation and transparency has been solid and improving. The 2002 IMF ROSC emphasizes that transparency in fiscal policy and management in Canada complies with the IMF fiscal policy transparency code and, in some instances, represents best practice. In particular, the 2002 ROSC highlighted the use of private sector economic forecasts, prudence factors, and a contingency reserve for fiscal forecasting in Canada. Fiscal management was also commended for its statistical integrity, impartial tax administration, open procurement, and a transparent regulatory process. Nevertheless, the ROSC found several areas where Canada could improve its fiscal transparency regime, such as preparing timely and equally convincing current-year approximations of federal and provincial budgets; creating an extensive account of the budget cycle procedures and expenditure management systems; and systematically reporting the use of reserves for non-economic contingencies. However, many of these suggestions have since been addressed, according to the 2008 Article IV Consultations. For instance, Statistics Canada now publishes consolidated data for federal and provincial budgets on a Financial Management System basis. Plus, the Government of Canada and the Organization for Economic Co-operation and Development now publish thorough details of budget and expenditure management practices, such as a joint publication called "Budgeting in Canada." Furthermore, the Treasury Board Secretariat (TBS) posts on its website full descriptions of expenditure management policies and practices. The TBS also includes in its Budget and Update documents a detailed clarification of the budget cycle and process. More »

Institutional and market infrastructure

A 2006 article on insolvency and restructuring in Canada by T. Sandler and S. Abitan indicates that insolvency proceedings are generally conducted under court supervision and governed by the Companies' Creditors Arrangement Act (CCAA) or the Bankruptcy and Insolvency Act (BIA), as appropriate. The Winding Up and Restructuring Act provides an alternative to the liquidation proceedings of the BIA and is the only instrument available for the liquidation of financial institutions. In 2005, the Government of Canada introduced an insolvency reform package in order to modernize the requirements of both the CCAA and the BIA, and to establish the legislative framework for the Wage Earner Protection Program. The Parliament of Canada's website notes that, from 2004 to 2007 (that is, during the 38th and 39th parliaments and during the last three sessions of the current parliament), the government has presented three versions of the Act to amend the BIA, the CCAA, the Wage Earner Protection Program Act, and chapter 47 of the Statutes of Canada. The first two bills, C-55 and C-62, never came into force. The third, Bill C-12, received a royal assent in December 2007 but has yet to be proclaimed into force by the Governor-in-Council. Amendments were added to C-12 in order to rectify several technical deficiencies found in previous versions of the insolvency reform legislation package. However, there is insufficient publicly available information regarding Canada's compliance with the Principles and Guidelines for Effective Insolvency and Creditor Rights Systems developed by the World Bank. More »

According to a January 2006 media release by the Canadian Institute of Chartered Accountants, in March 2005 the Accounting Standards Board of Canada (AcSB) requested public comment on Canada's future direction regarding its accounting standards. The objective was to gather feedback on a proposal to adopt International Financial Reporting Standards (IFRSs) in lieu of the Canadian Generally Accepted Accounting Principles. At the end of numerous consultations, the vast majority of stakeholders favored IFRS adoption, and a Strategic Plan to that effect was approved the following year. In its February 2008 media release, the AcSB confirmed the adoption of IFRSs, setting the official changeover date as January 1, 2011. In its March 2008 Bulletin, the AcSB declared its intent to adopt IFRSs in effect as of January 1, 2007 without modification. In a March 2008 Bulletin, the AcSB announced that conversion to IFRSs will be required of all publicly accountable enterprises (PAEs), which include publicly listed companies and enterprises with fiduciary responsibilities, such as banks, insurance companies, credit unions, securities firms, mutual funds and investment banks. Private companies and not-for-profit organizations are permitted, but not required, to adopt IFRSs in 2011. Although the Canadian Securities Administrators initially proposed an early (2009) opt-in alternative for PAEs, the Canadian Office of the Superintendent of Financial Institutions has rescinded this early IFRS adoption option. More »

Securities markets in Canada operate under a system of provincial regulation and supervision, with a total of 13 regulatory authorities. As stated in the International Monetary Fund's 2006 Article IV Consultation report, Canada has undertaken a significant harmonization of corporate governance rules with the United States. Improvements were achieved in the areas of enforcement, accounting and auditing, financial reporting, and corporate governance, as reported in a 2006 study by E. Waitzer. Waitzer further reported that weaknesses remain in the corporate governance regime due to Canada's highly fragmented system and the overall lack of agency accountability and coordination. In 2006, the Toronto Stock Exchange adopted the Corporate Governance Guide to Good Disclosure. Ontario and members of the Crawford Panel - an independent expert panel - are currently discussing a proposal with other provinces to establish a common securities regulator. Nevertheless, there is insufficient information publicly available addressing Canada's compliance with the Organization for Economic Cooperation and Development Principles of Corporate Governance. More »

Prior to 2005, the stated objective of the Canadian Auditing and Assurance Standards Board (AASB) was to harmonize Canadian Generally Accepted Auditing Standards (GAAS) with the International Standards on Auditing (ISAs) issued by the International Auditing and Assurance Standards Board. At the same time, the AASB was working to reduce the differences between GAAS and the U.S. Public Company Accounting Oversight Board's standards. However, in November 2005, the AASB issued an "Invitation to Comment" seeking public input regarding a proposed convergence of the Canadian GAAS with ISAs. Following extensive public consultation, the AASB concluded that most of the stakeholders strongly favored the proposal. As a result, a new strategic standard-setting approach was approved during the AASB June 2006 meeting. According to the AASB's March 2008 report "Adopting International Standards on Auditing," once ISAs are adopted, the Handbook Sections covering the audit of financial statements will be called "Canadian Auditing Standards" (CASs) and will form the Canadian GAAS. In its March 2008 meeting, the AASB reiterated its objective to adopt ISAs as CASs effective December 15, 2009. The AASB announced that it intends to adopt ISAs in their entirety, although there may be instances where modifications will be required. The modifications, however, will be clearly identified in the text of the new standards. More »

The Financial Action Task Force (FATF) conducted a mutual evaluation of Canada's Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) regime against its own 40+9 recommendations and special recommendations (SR). The FATF's 2008 report concludes that Canada is fully compliant with only 7 recommendations and SRs, largely compliant with 23, partially compliant with 8, and is non-compliant with 11. The report notes that although Canada's AML/CFT legal framework is generally in line with the FATF standards, its effective implementation needs enhancement. More importantly, the report notes that the preventive system in Canada for financial institutions is generally insufficient to meet FATF Recommendations, and Canada is non-complaint with most of the FATF recommendations relating to Designated Non-Financial Business and Professions. At the time of the mutual evaluation, the Canadian authorities were in the process of amending existing rules and regulations and enacting new ones so as to remedy these shortcomings. Although the FATF report does acknowledge that these new changes aim at implementing the FATF standards, they cannot affect the FATF assessment because the new requirements are not scheduled to be officially launched until June and December, 2008. More »

The Large Value Transfer System (LVTS), which is designated as a systemically important payment system (SIPS) by the Bank of Canada (BoC) was assessed by the IMF, and its findings were published in the IMF's 2000 Report on the Observance of Standards and Codes (ROSC). The ROSC concluded that the LVTS was in full compliance with the Committee on Payment and Settlement Systems (CPSS) Core Principles for Systemically Important Payment Systems (CPSIPS). In 2001, the BoC published a self-assessment by C. Goodlet, in which the LVTS was again assessed to be in full compliance with the CPSIPS. The LVTS began operation in February 1999, and is an electronic credit transfer system that provides real-time processing and intraday finality of payments, and guarantees end-of-day settlement. The Canadian Payments Association owns and operates the LVTS. The LVTS is designated for oversight by the BoC under the Payment Clearing and Settlement Act. According to the IMF, the LVTS system is one of the most secure and reliable payment systems in the world, has a well-founded legal basis under all relevant jurisdictions, and has clearly defined procedures for the management of credit and liquidity risks. Most importantly, the LVTS provides prompt final settlement on the day of value, and it is fully capable of ensuring the timely completion of daily settlements in the event of an inability to settle by a participant. The CLS Bank settles foreign exchange transactions and is also designated by the BoC as a SIPS. According to a self assessment by CLS Bank, the system fully observes the CPSS CPSIPS. The other system of systemic importance in Canada is the CDSX, a securities settlement system, which is not under the purview of the CPSS CPSIPS. More »

Financial Regulation and Supervision

In its 2008 Financial System Stability Assessment (FSSA) Update, the IMF commended Canada's "highly effective and nearly unified" regulatory and supervisory framework. The banking system is regulated by a tripartite structure comprised of the Office of the Superintendent of Financial Institutions (OSFI), the Canada Deposit Insurance Corporation (CDIC), and the Department of Finance (DoF). The OSFI is the only agency responsible for supervising banks, whereas the CDIC and the DoF are in charge of developing the policy and legislative framework for the financial sector. In 2000 the IMF published a Report on the Observance of Standards and Codes for Canada in which it assessed Canada's observance of the Basel Core Principles (BCPs) for Effective Banking Supervision and concluded that full compliance with all BCPs would be achieved following the implementation of the proposals contained in the government's 1999 Policy Paper on Reforming Canada's Financial Services Sector. According to the 2008 FSSA, these changes were subsequently made. The legal framework for banking supervision in Canada is mainly comprised of the 1991 Bank Act, which was last amended in 2007. More »

Securities markets in Canada operate under a system of provincial regulation and supervision, with a total of 13 regulatory authorities. The four largest regulatory agencies in Canada, namely the Alberta Securities Commission, the Ontario Securities Commission, the Autorité des Marchés Financiers, and the British Columbia Securities Commission, supervise about 95 percent of the securities market. The IMF, in a 2008 Financial Sector Assessment Program, based on a detailed assessment of securities regulation, concludes that Canada's regulatory framework for the securities market shows high levels of implementation of the International Organization of Securities Commissions (IOSCO) Objectives and Principles of Securities Regulation. It further notes that the regulatory framework for most of the areas covered by securities regulation is robust. Shortcomings were identified with regard to the regulation and supervision of collective investment schemes and enforcement, as well as coordination among the provincial regulators. Ontario and members of the Crawford Panel - an independent expert panel - are currently discussing a proposal with other provinces to establish a common securities regulator. The legal framework governing the securities market in Canada is mainly comprised of the 1990 Securities Act and its General Regulation, as amended in March 2008. More »

In its 2008 FSSA Update, the IMF commended Canada's "highly effective and nearly unified" regulatory and supervisory framework. The integrated supervisory authority - the Office of the Superintendent of Financial Institutions - is under the authority of the Minister of Finance, and is responsible for the supervision and regulation of federal financial institutions, including insurance companies, banks, trust and loan companies, cooperative credit associations, fraternal benefit societies, and private pension plans. Regulation of the insurance industry is shared between the federal and provincial governments, and is mainly contained under the Insurance Companies Act of 1991. According to the IMF's 2000 ROSC, which assessed Canada's observance of the Insurance Supervisory Principles (ISPs) promulgated by the International Association of Insurance Supervisors (IAIS), Canada fully complied with most of the IAIS prudential regulation principles and broadly observed the remainder. However, the ISPs were consequently superseded by the new and more stringent Insurance Core Principles (ICPs), and there is insufficient information publicly available regarding Canada's compliance with the ICPs as revised by the IAIS in 2003. More »

Legend:

Credit Ratings

Moody's Aaa/Stable

Fitch AAA/Stable

Standard & Poor's AAA/Stable

Macroeconomic Data

2007 GDP (Current Prices): 1,432.1 billion USD (IMF)

2007 GDP (Per Capita): 43,485 USD (IMF)

2008 GDP (Growth Forecast): 1.3% (IMF)

2008 Inflation (CPI): 1.6% (IMF)

2007 Unemployment: 5.9% (CIA)

2006 Foreign Direct Investment

FDI (Inward): 69 billion USD (UNCTAD)

FDI (Outward): 45.2 billion USD (UNCTAD)

2006 Official Development Assistance

ODA (Received): N/A million USD (OECD)

ODA (Disbursed): 3,684 million USD (OECD)