A report from CD Howe Institute calls for banks to be allowed to issue more covered bonds to fund mortgages. The use of bonds backed entirely by the issuing lender are popular with investors because the underlying high-quality mortgages are not at risk even if the bank fails. There is currently a cap on covered bonds of 4 per cent of a bank’s assets but report author Finn Poschmann says this should be raised, noting that currently the limit on Canadian banks is lower than other similar economies.
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