The creation of the Canadian Lenders Assurance Facility to ease pressures on supply of funds for lending in Canada is an unnecessary action by the federal government, according to Standard & Poor’s Ratings Services.

Responding to the announcement that the federal government made on Thursday, Standard & Poor’s said the foundation of the Canadian banking system remains strong.

“In our view, the Canadian banks entered the liquidity crisis better capitalized for their risk profiles and maintained higher well-capitalized ratios relative to their peers in other jurisdictions,” said Standard & Poor’s credit analyst Lidia Parfeniuk in a release.

Standard & Poor’s acknowledges that the government’s temporary guarantee program is important in keeping Canadian banks competitive on the international funding scene, given similar moves by governments in the U.S. and Europe. The facility will also act as a pre-emptive measure to help maintain market confidence at current levels, S&P said.

However, the ratings company said the move is currently unnecessary considering Canadian banks’ substantially stronger and more conservative balance sheets, including generally prudent risk practices and underwriting that have helped them maintain better credit quality metrics relative to many of their international counterparts.

This is partially due to less home price appreciation in Canada compared to the U.S., and a relatively small nonprime mortgage component, S&P said.

It added that Canadian banks have also benefited from business line diversification and strong consumer deposit platforms.

The industry’s strength is further reflected in the prevalence of government guarantees for conventional mortgage, farm, and small business loans, and a consumer credit culture that is still relatively strong, according to S&P.