##gors being personally liable for their debts and mortgage interest not being tax - deductible. in addition, key lending standards are effectively set by the terms of government - backed mortgage insurance. 7 banks are required to have insurance on the mortgages of purchasers office of the superintendent of financial institutions act, 1985. published by minister of justice. examples with an explicit macroprudential focus include the european systemic risk board for the european union, the systemic risk council in the united states, and unitary models housed in central banks in the united kingdom and australia. financial stability board, “ intensity and effectiveness of sifi supervision ; recommendations for enhanced supervision ”, 1 november 2010. the publicly owned mortgage insurer, canada mortgage and housing corporation, has an explicit sovereign guarantee and is the largest insurance provider. lenders relying on private mortgage insurers receive a government guarantee for losses ( from insurer failure ) on amounts above 10 per cent of the original mortgage. with loan - to - value ratios of over 80 per cent. all borrowers must satisfy an incomes test, and insurance premiums vary with loan - to - value and amortization periods. leading up to the crisis, the principal - agent problems that developed in originate - to - distribute models were absent in canada. banks largely retained the risks of their underwriting, maintained their standards, and held onto credit skills. most mortgages originated by banks were for their own balance sheets and, as a result, underwriting standards remained high. banks obtained natural geographic diversification of their loan portfolios through their nationwide branch system, which eliminated one motivation for securitization. only about 30 per cent of mortgages in canada are securitized. moreover, securitization in canada is dominated by government - guaranteed mortgage - backed securities ( about 85 per cent pre - crisis ). as a consequence, the mortgage - backed security market in canada continued to function well during the crisis. other private - label securitization markets were less developed. similarly, there was little usage of credit default swaps to hedge canadian corporate risk. with exposures largely staying on balance sheet, canadian bankers remained bankers rather than warehousers or traders. consider what happened elsewhere. the severing of the relationship between originator and risk holder lowered underwriting and monitoring standards. in addition, the transfer of risk itself was frequently incomplete, with banks retaining large quantities of supposedly risk - free senior tranches of structured products. these exposures were compound

the crisis, while the role of the state faces much less scrutiny. the question of whether monetary authorities, prior to the crisis, properly regulated interest rates as a key price in the economy attracts much less attention in the debate than it should. the same is true for the question of whether the existing store of individual countries'supervision tools was used correctly and adequately before the crisis. this is interesting, as the crisis poses some new challenges and questions. should monetary policy try to stabilize a broader set of indicators in the future, not just prices of consumer goods, but also real - estate or other asset prices? does it make sense to have a separate currency but not to have an autonomous monetary policy, like the baltic countries and bulgaria, or to have a separate currency but not to have an effective lender of last resort, like iceland? doesn't the system of exchange - rate pegs, quasi - pegs or currency boards increase imbalances of those who are pegged, and thus their vulnerability in a crisis? these questions are important, but they are not being properly discussed in the current debate. many forget that the state's role in the financial sector is already huge. central banks, finance ministries and various state agencies across the globe do regulate and supervise the financial industry more, not less, than many other industries. yet that is precisely why every further tightening of the screws should be carefully considered and analyzed, not adopted under pressure or threat, hastily or imprudently. one should bear in mind that regulation never distinguishes the bad banks from the good ones. and even this crisis has revealed that many financial institutions are in good shape and coping with its consequences quite well. although many people won't admit it, new rules being drawn up today will radically affect the financial market tomorrow and beyond. that's the way it goes : times of crisis permit dramatic and rapid changes that would not be implementable, or even thinkable, under normal circumstances. but when the dust settles, it is very difficult to reverse them. all thinking people in the financial sector should want to ensure that the rash solutions adopted in the present bad times, many of which will do little or no good anyway, do not in the long run generate much worse times for the industry, and hence its clients. putting out a fire is one thing. but improving the fire regulations is quite another. certainly a large fire can provide inspiration for future fire prevention. but it is by no means wise to fight the