In a speech to the Canadian Club of Ottawa and the Canadian Institute of International Affairs, Bank of Canada Governor David Dodge reviewed the progress made in strengthening the international financial architecture, preventing global financial crises, and expediting orderly solutions in the event of a crisis.

Mr. Dodge stressed that in an interconnected world, Canada's open economy is very much affected by world events—hence, our strong interest in a healthy international financial environment.

The Governor said that much has been done to develop a strategy to reduce the incidence of future crises. The key elements of that strategy are sound and credible macroeconomic policies, including an appropriate exchange rate regime, and a robust financial infrastructure.

Mr. Dodge pointed out that "when it comes to crisis management and resolution, the international community is still hard at work. Many issues on how to put in place a framework for promoting orderly debt restructuring remain outstanding. But significant progress is being made."

In this context, he suggested that the Action Plan endorsed by the G-7 countries last month was an important step. He highlighted, in particular, the plan's recognition of the need for clear limits on official lending. The Bank views such limits as key in promoting more realistic expectations among debtors and creditors and thus providing the right incentives for the timely resolution of crises.

The Governor said that a lot more needs to be done to ensure that the ideas of the Action Plan are effectively implemented. This is important. "The stakes are high—not only because of the economic costs, but because of the social costs and the human suffering caused by financial crises. And, in an increasingly integrated world, more than ever, we are all in this together."