Household debt levels are now the most significant risk to Canada's economy, says a Bank of Canada report released on Wednesday.

Mark Carney, governor of the Bank of Canada, told the Senate's banking committee on Wednesday afternoon that Canadians are now as indebted as the Americans and British.

"The proportion of Canadian households that would be highly vulnerable to an adverse economic shock has risen to its highest level in nine years," he said.

Carney also said international debt troubles could affect Canada's economy.

TD Bank's Craig Alexander told CTV News on Wednesday that when the financial system is distressed the cost of borrowing goes up sharply, leading to higher borrowing costs for Canadians.

Carney said indebted nations, including the United States, should take a lesson from Canada's experience with its credit crisis in the mid-1990s, including not assuming money will always be available to borrow from bond markets.

He warned that countries with unsustainable deficits and large national debts shouldn't count on access to low interest credit rates forever.

The address came after the release of the bank's biennial Financial Systems Review on Wednesday.

The review took a pessimistic view of growing debt problems around the world and concluded that risks to the economy have increased over the past six months.

Some of the risks Carney highlighted include strained sovereign balance sheets, a chance that a long period of low interest rates globally may fuel excessive risk-taking and the high level of household indebtedness increasing financial vulnerabilities in Canada.

TD Bank economist Diana Petramala told The Canadian Press that the review suggests the Bank of Canada is in worry mode and is unlikely to raise interest rates until 2012.

"All of these risks (cited by the central bank) could have significant economic consequences on Canada's economy and financial system," Petramala said.

"In addition, they are medium-term (rather than short-term) in nature, suggesting they are unlikely to disappear any time soon. Under our current forecast, we don't anticipate Canada's overnight rate to reach a more normal level of three per cent until 2013."

With a report by CTV's Richard Madan and files from The Canadian Press