G21 - Banks; Depository Institutions; Micro Finance Institutions; Mortgages

• The Role of Long-Term Contracting in Business Lending

  Staff Working Paper 2024-2 Phoebe Tian

  This paper examines inefficiencies arising from a lack of long-term contracting in small business lending in China.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions JEL Code(s): D, D8, D83, D86, G, G2, G21, L, L1, L14, L2, L26
• January 15, 2024

  Flood risk and residential lending

  Craig Johnston, Geneviève Vallée, Hossein Hosseini Jebeli, Miguel Molico, Marie-Christine Tremblay, Aidan Witts

  We present key findings of a recent study that evaluates the credit risk that flooding poses to the residential lending activities of Canadian banks and credit unions. Results show that such risk currently appears modest but could become larger with climate change.

  Content Type(s): Publications, Financial System Hub articles Topic(s): Central bank research, Climate change, Credit risk management, Econometric and statistical methods, Financial institutions, Financial stability JEL Code(s): C, C8, C81, G, G2, G21, Q, Q5, Q54

• Climate-Related Flood Risk to Residential Lending Portfolios in Canada

  Staff Discussion Paper 2023-33 Craig Johnston, Geneviève Vallée, Hossein Hosseini Jebeli, Brett Lindsay, Miguel Molico, Marie-Christine Tremblay, Aidan Witts

  We assess the potential financial risks of current and projected flooding caused by extreme weather events in Canada. We focus on the residential real estate secured lending (RESL) portfolios of Canadian financial institutions (FIs) because RESL portfolios are an important component of FIs’ balance sheets and because the assets used to secure such loans are immobile and susceptible to climate-related extreme weather events.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Central bank research, Climate change, Credit risk management, Econometric and statistical methods, Financial institutions, Financial stability JEL Code(s): C, C8, C81, G, G2, G21, Q, Q5, Q54

• The impact of higher interest rates on mortgage payments

  Staff Analytical Note 2023-19 Maria teNyenhuis, Adam Su

  We investigate how the increase in interest rates since early 2022 is affecting mortgage payments. By November 2023, less than half of mortgage holders had faced higher payments. Many borrowers will see a sizable increase in payments at renewal, although income growth could help mitigate the impact.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Credit and credit aggregates, Financial institutions, Interest rates, Recent economic and financial developments JEL Code(s): D, D1, E, E4, E5, G, G2, G21

• How Far Do Canadians Need to Travel to Access Cash?

  Staff Discussion Paper 2023-28 Heng Chen, Daneal O’Habib, Hongyu Xiao

  This paper develops a travel-based metric to measure Canadians’ access to cash from automated banking machines (ABMs) and financial institution branches. We find that, overall, access to cash remained stable between 2019 and 2022. The total number of ABMs in Canada increased by 3.7% and the total number of branches decreased by 5.2% during that period.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Bank notes, Financial services, Regional economic developments JEL Code(s): G, G2, G21, J, J1, J15, R, R5, R51

• Estimating the Appropriate Quantity of Settlement Balances in a Floor System

  Staff Discussion Paper 2023-26 Narayan Bulusu, Matthew McNeely, Kaetlynd McRae, Jonathan Witmer

  This paper presents two complementary approaches to estimating the appropriate quantity of settlement balances needed to effectively operate monetary policy under a floor system in Canada.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Financial institutions, Financial markets, Financial system regulation and policies, Monetary policy implementation, Payment clearing and settlement systems JEL Code(s): E, E4, E41, E42, E5, E52, E58, G, G2, G21, G28

• Anonymous Credentials: Secret-Free and Quantum-Safe

  Staff Working Paper 2023-50 Raza Ali Kazmi, Cyrus Minwalla

  An anonymous credential mechanism is a set of protocols that allows users to obtain credentials from an organization and demonstrate ownership of these credentials without compromising users’ privacy. In this work, we construct the first secret-free and quantum-safe credential mechanism.

  Content Type(s): Staff research, Staff working papers Topic(s): Central bank research, Digital currencies and fintech, Payment clearing and settlement systems JEL Code(s): E, E4, E42, G, G2, G21, O, O3, O31

• Monetary Policy Transmission, Bank Market Power, and Wholesale Funding Reliance

  Staff Working Paper 2023-35 Amina Enkhbold

  I study how banking market concentration and reliance on wholesale funding affect monetary policy transmission to mortgage rates. I find that this transmission is imperfect and dampens the response of consumption, output, and housing prices.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions, Inflation targets, Monetary policy transmission, Wholesale funding JEL Code(s): E, E4, E44, E5, E52, G, G2, G21

• Privacy-Preserving Post-Quantum Credentials for Digital Payments

  Staff Working Paper 2023-33 Raza Ali Kazmi, Duc-Phong Le, Cyrus Minwalla

  Digital payments and decentralized systems enable the creation of new financial products and services for users. One core challenge in digital payments is the need to protect users from fraud and abuse while retaining privacy in individual transactions. We propose a pseudonymous credential scheme for use in payment systems to tackle this problem.

  Content Type(s): Staff research, Staff working papers Topic(s): Central bank research, Digital currencies and fintech, Payment clearing and settlement systems JEL Code(s): E, E4, E42, G, G2, G21, O, O3, O31

• Crowdfunding and Risk

  Staff Working Paper 2023-28 David Cimon

  Crowdfunding may enable unique products to reach the consumer market. I model a crowdfunding technology that publicly screens consumer demand early in the production process. In this model, entrepreneurs like crowdfunding for risky projects where demand is uncertain, but not for large, safe projects or for projects where production costs are uncertain.

  Content Type(s): Staff research, Staff working papers Topic(s): Digital currencies and fintech, Financial markets, Financial services JEL Code(s): G, G2, G21, G24, G3, G32