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The IMF and Risk Management in Canada

New developments in financial markets will present new challenges for risk management in Canada, according to the International Monetary Fund (IMF). With a "sound and stable financial system" in place, Canada has already made great progress in the area of risk management, but still has work to do. Addressing the risk management capabilities of the Canadian financial system, the IMF observes that "The changing nature of financial instruments, including the growing reliance on derivative and other off-balance sheet transactions, the securitization of assets in order to reduce the need for regulatory capital, and the rapid growth of life insurance segregated funds could increase the volatility of income and heightens the importance of maintaining and developing further good risk management tools." The IMF also suggests that the Canadian financial industry should work towards the coordination and harmonization of the regulatory framework, at both the federal and provincial levels. Recent cooperation in this area was seen with the restructuring of the respective roles of the exchanges, as reported below.

Source: IMF's statement of preliminary findings to the Executive Board