Financial stability

• The Positive Case for a CBDC

  Staff Discussion Paper 2021-11 Andrew Usher, Edona Reshidi, Francisco Rivadeneyra, Scott Hendry

  We discuss the competition and innovation arguments for issuing a central bank digital currency (CBDC). A CBDC could be an effective competition policy tool for payments. A CBDC could also support the vibrancy of the digital economy. It could help solve market failures and foster competition and innovation in new digital payments markets.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Digital currencies and fintech, Financial institutions, Financial stability JEL Code(s): E, E4, E42, E5, E58, L, L4, L5

• Stressed but not Helpless: Strategic Behaviour of Banks Under Adverse Market Conditions

  Staff Working Paper 2021-35 Grzegorz Halaj, Sofia Priazhkina

  Our stress-testing tool considers banks under stress that can strategically manage their balance sheets. Using confidential Canadian supervisory data, we assess whether bank behaviour to maximize shareholder value can amplify a hypothetical stress scenario.

  Content Type(s): Staff research, Staff working papers Topic(s): Central bank research, Economic models, Financial institutions, Financial stability, Financial system regulation and policies JEL Code(s): C, C6, C63, C7, C72, G, G2, G21

• BoC–BoE Sovereign Default Database: What’s new in 2021?

  Staff Analytical Note 2021-15 David Beers, Elliot Jones, Zacharie Quiviger, John Walsh

  The BoC–BoE database of sovereign debt defaults, published and updated annually by the Bank of Canada and the Bank of England, provides comprehensive estimates of stocks of government obligations in default.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Debt management, Development economics, Financial stability, International financial markets JEL Code(s): F, F3, F34, G, G1, G10, G14, G15

• Analyzing supply and demand for business loans using microdata from the Senior Loan Officer Survey

  Staff Analytical Note 2021-13 Dylan Hogg

  Both supply and demand factors help determine the level of business lending in the economy, but most data show only their combined effect on prices and quantities. Using the Bank of Canada’s Senior Loan Officer Survey microdata on financial institutions’ lending conditions and demand, we separate supply from demand effects.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Credit and credit aggregates, Financial institutions, Financial stability JEL Code(s): D, D2, D22, G, G0, G01, G2

• An Optimal Macroprudential Policy Mix for Segmented Credit Markets

  Staff Working Paper 2021-31 Jelena Zivanovic

  How can macroprudential policy and monetary policy stabilize segmented credit markets? Is there a trade-off between financial stability and price stability? I use a theoretical model to evaluate the performance of alternative policies and find the optimal mix of macroprudential and monetary policy in response to aggregate shocks.

  Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Credit and credit aggregates, Credit risk management, Financial stability, Financial system regulation and policies JEL Code(s): E, E3, E30, E4, E44, E5, E50

• Bank Runs, Bank Competition and Opacity

  Staff Working Paper 2021-30 Toni Ahnert, David Martinez-Miera

  How is the stability of the financial sector affected by competition in the deposit market and by decisions banks make about transparency? We find that policies that aim to increase bank competition lead to higher bank deposit rates, increasing both withdrawal incentives and instability.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions, Financial markets, Financial stability, Financial system regulation and policies, Wholesale funding JEL Code(s): G, G0, G01, G2, G21
• June 16, 2021

  Opening Statement before the Standing Senate Committee on Banking, Trade and Commerce

  Opening statement Tiff Macklem Standing Senate Committee on Banking, Trade and Commerce Ottawa, Ontario

  Content Type(s): Press, Speeches and appearances, Opening statements Topic(s): Coronavirus disease (COVID-19), Financial stability, Monetary policy, Recent economic and financial developments

• Can regulating bank capital help prevent and mitigate financial downturns?

  Staff Analytical Note 2021-12 Alejandro García, Josef Schroth

  Countercyclical capital buffers are regulatory measures developed in response to the global financial crisis of 2008–09. This note focuses on how time-varying capital buffers can improve financial stability in Canada

  Content Type(s): Staff research, Staff analytical notes Topic(s): Business fluctuations and cycles, Credit and credit aggregates, Credit risk management, Financial stability, Financial system regulation and policies, Lender of last resort JEL Code(s): E, E1, E13, E3, E32, E4, E44

• Shaping the future: Policy shocks and the GDP growth distribution

  Staff Working Paper 2021-24 Francois-Michel Boire, Thibaut Duprey, Alexander Ueberfeldt

  Can central bank and government policies impact the risks around the outlook for GDP growth? We find that fiscal stimulus makes strong GDP growth more likely—even more so when monetary policy is constrained—rather than weak GDP growth less likely. Thus, fiscal stimulus should accelerate the recovery phase of the COVID-19 pandemic.

  Content Type(s): Staff research, Staff working papers Topic(s): Central bank research, Econometric and statistical methods, Financial stability, Fiscal policy, Monetary policy JEL Code(s): C, C3, C32, C5, C53, E, E5, E52, E6, E62
• May 20, 2021

  Release of the Financial System Review

  Opening statement Tiff Macklem Ottawa, Ontario

  Press conference following the release of the Financial System Review.

  Content Type(s): Press, Speeches and appearances, Opening statements Topic(s): Climate change, Cyber security, Financial markets, Financial stability, Financial system regulation and policies, Housing, Recent economic and financial developments