G23 - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

• Government of Canada Securities in the Cash, Repo and Securities Lending Markets

  Staff Discussion Paper 2018-4 Narayan Bulusu, Sermin Gungor

  This paper documents the properties of Government of Canada securities in cash, repo and securities lending transactions over their life cycle. By tracking every security from issuance to maturity, we are able to highlight inter-linkages between the markets for cash and for specific securities.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Financial markets, Wholesale funding JEL Code(s): G, G1, G12, G2, G21, G23

• What Drives Interbank Loans? Evidence from Canada

  Staff Working Paper 2018-5 Narayan Bulusu, Pierre Guérin

  We identify the drivers of unsecured and collateralized loan volumes, rates and haircuts in Canada using the Bayesian model averaging approach to deal with model uncertainty. Our results suggest that the key friction driving behaviour in this market is the collateral reallocation cost faced by borrowers.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial markets, Wholesale funding JEL Code(s): C, C5, C55, E, E4, E43, G, G2, G23

• A Calibrated Model of Intraday Settlement

  Staff Discussion Paper 2018-3 Héctor Pérez Saiz, Siddharth Untawala, Gabriel Xerri

  This paper estimates potential exposures, netting benefits and settlement gains by merging retail and wholesale payments into batches and conducting multiple intraday settlements in this hypothetical model of a single "calibrated payments system." The results demonstrate that credit risk exposures faced by participants in the system are largely dependent on their relative activity in the retail and wholesale payments systems.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Econometric and statistical methods, Financial stability, Payment clearing and settlement systems JEL Code(s): C, C5, C58, G, G2, G21, G23

• Tail Risk in a Retail Payment System: An Extreme-Value Approach

  Staff Discussion Paper 2018-2 Héctor Pérez Saiz, Blair Williams, Gabriel Xerri

  The increasing importance of risk management in payment systems has led to the development of an array of sophisticated tools designed to mitigate tail risk in these systems. In this paper, we use extreme value theory methods to quantify the level of tail risk in the Canadian retail payment system (ACSS) for the period from 2002 to 2015.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Econometric and statistical methods, Financial stability, Payment clearing and settlement systems JEL Code(s): C, C5, C58, G, G2, G21, G23

• Do Liquidity Proxies Measure Liquidity in Canadian Bond Markets?

  Staff Analytical Note 2017-23 Jean-Sébastien Fontaine, Jeffrey Gao, Jabir Sandhu, Kobe Wu

  This analytical note evaluates the reliability of proxies for measuring liquidity in Canadian bond markets. We find that price-impact and bid-ask proxies paint a similar picture of evolving liquidity conditions to that obtained from richer measures of liquidity for benchmark Government of Canada bonds.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Debt management, Financial markets JEL Code(s): G, G1, G12, G14, G2, G23, G3, G32

• The Rise of Non-Regulated Financial Intermediaries in the Housing Sector and its Macroeconomic Implications

  Staff Working Paper 2017-36 Hélène Desgagnés

  I examine the impact of non-regulated lenders in the mortgage market using a dynamic stochastic general equilibrium (DSGE) model. My model features two types of financial intermediaries that differ in three ways: (i) only regulated intermediaries face a capital requirement, (ii) non-regulated intermediaries finance themselves by selling securities and cannot accept deposits, and (iii) non-regulated intermediaries face a more elastic demand.

  Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Economic models, Financial system regulation and policies, Housing JEL Code(s): E, E3, E32, E4, E44, E47, E6, E60, G, G2, G21, G23, G28
• May 11, 2017

  The Life Cycle of Government of Canada Bonds in Core Funding Markets

  Bank of Canada Review - Spring 2017 Narayan Bulusu, Sermin Gungor

  Data on the use of government securities in the repo, securities lending and cash markets suggest there are bond market clienteles in Canada. Shorter-term bonds are more prevalent in the repo market, while longer-maturity securities are more active in the securities lending market—consistent with the preferred habitat hypothesis. These results could help design better debt-management strategies and more-effective policies to maintain well-functioning financial markets.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Debt management, Financial markets JEL Code(s): G, G1, G12, G2, G23

• Non-Bank Investors and Loan Renegotiations

  Staff Working Paper 2016-60 Teodora Paligorova, João Santos

  We document that the structure of syndicates affects loan renegotiations. Lead banks with large retained shares have positive effects on renegotiations. In contrast, more diverse syndicates deter renegotiations, but only for credit lines.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions, Financial system regulation and policies JEL Code(s): G, G2, G21, G23
• December 15, 2016

  The Rise of Mortgage Finance Companies in Canada: Benefits and Vulnerabilities

  Financial System Review - December 2016 Donald Coletti, Marc-André Gosselin, Cameron MacDonald

  The Rise of Mortgage Finance Companies in Canada: Benefits and Vulnerabilities, by Don Coletti, Marc-André Gosselin and Cameron MacDonald, examines the increased importance of mortgage finance companies (MFCs) in the Canadian mortgage market. The authors discuss the MFC business model, highlighting MFCs’ relationship with mortgage brokers and banks, as well as the benefits they bring to Canadian borrowers. The authors conclude with a discussion of the impact of MFCs on financial system vulnerabilities.

  Content Type(s): Publications, Financial System Review articles Topic(s): Financial institutions, Financial stability, Financial system regulation and policies JEL Code(s): G, G2, G23
• December 15, 2016

  Monitoring Shadow Banking in Canada: A Hybrid Approach

  Financial System Review - December 2016 Bo Young Chang, Gitanjali Kumar, André Usche, Michael Januska

  In Monitoring Shadow Banking in Canada: A Hybrid Approach, Bo Young Chang, Michael Januska, Gitanjali Kumar and André Usche discuss how lending that occurs outside the traditional banking system provides benefits to the economy but must be monitored carefully for potential financial sector vulnerabilities. They describe how the Bank defines and measures shadow banking and how it assesses vulnerabilities in the sector, using an approach that examines both markets and entities.

  Content Type(s): Publications, Financial System Review articles Topic(s): Financial institutions, Financial markets, Financial stability JEL Code(s): G, G0, G01, G2, G23