The Office of the Superintendent of Financial Institutions Canada says that Canadian banks are taking a cautious approach to hedge funds, and it believes that their risk management is adequate.

Speaking to the Senate Standing Committee on Banking, Trade and Commerce in Ottawa today, Julie Dickson, acting superintendent, reported that a review of the major banks’ exposure to hedge funds, and their management of that exposure, was completed recently.

“This review indicated that the exposure of the banks to hedge funds is relatively small, and that risk management practices are adequate,” she said. “Canadian banks are found to be taking a cautious approach to hedge funds.”

“While OSFI does not currently have any concerns with the participation of Canadian financial institutions in hedge funds, activity in this area will continue to be evaluated as part of OSFI’s ongoing supervisory process,” she added.