G2 - Financial Institutions and Services

• The MacroFinancial Risk Assessment Framework (MFRAF), Version 2.0

  Technical Report No. 111 Jose Fique

  This report provides a detailed technical description of the updated MacroFinancial Risk Assessment Framework (MFRAF), which replaces the version described in Gauthier, Souissi and Liu (2014) as the Bank of Canada’s stress-testing model for banks with a focus on domestic systemically important banks (D-SIBs).

  Content Type(s): Staff research, Technical reports Topic(s): Financial stability, Financial system regulation and policies JEL Code(s): C, C7, C72, E, E5, E58, G, G0, G01, G2, G21, G28

• 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

• Do Canadian Broker-Dealers Act as Agents or Principals in Bond Trading?

  Staff Analytical Note 2017-11 Daniel Hyun, Jesse Johal, Corey Garriott

  Technology, risk tolerance and regulation may influence dealers to reduce their trading as principals (using their own balance sheets for sales and purchases of securities) in favour of agency trading (matching client trades).

  Content Type(s): Staff research, Staff analytical notes Topic(s): Financial institutions, Financial markets, Financial system regulation and policies, Market structure and pricing, Recent economic and financial developments JEL Code(s): G, G1, G14, G2, G20, L, L1

• Retrieving Implied Financial Networks from Bank Balance-Sheet and Market Data

  Staff Working Paper 2017-30 Jose Fique

  In complex and interconnected banking systems, counterparty risk does not depend only on the risk of the immediate counterparty but also on the risk of others in the network of exposures.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions, Financial stability JEL Code(s): C, C6, C63, D, D8, D85, G, G2, G21

• Information Contagion and Systemic Risk

  Staff Working Paper 2017-29 Co-Pierre Georg, Toni Ahnert

  We examine the effect of ex-post information contagion on the ex-ante level of systemic risk defined as the probability of joint bank default.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions, Financial stability JEL Code(s): G, G0, G01, G1, G11, G2, G21

• Fintech: Is This Time Different? A Framework for Assessing Risks and Opportunities for Central Banks

  Staff Discussion Paper 2017-10 Meyer Aaron, Francisco Rivadeneyra, Samantha Sohal

  We investigate the risks and opportunities to the mandates of central banks arising from fintech developments.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Central bank research, Digital currencies and fintech, Financial institutions, Payment clearing and settlement systems JEL Code(s): E, E4, E42, G, G1, G2, L, L1

• What Explains Month-End Funding Pressure in Canada?

  Staff Discussion Paper 2017-9 Christopher S. Sutherland

  The Canadian overnight repo market persistently shows signs of latent funding pressure around month-end periods. Both the overnight repo rate and Bank of Canada liquidity provision tend to rise in these windows. This paper proposes three non-mutually exclusive hypotheses to explain this phenomenon.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Financial markets, Interest rates, Monetary policy framework, Monetary policy implementation, Monetary policy transmission JEL Code(s): E, E4, E41, E43, E5, E52, E58, F, F3, F36, G, G1, G14, G15, G2, G21
• June 8, 2017

  Using Market-Based Indicators to Assess Banking System Resilience

  Financial System Review - June 2017 Cameron MacDonald, Maarten van Oordt

  This report reviews the use of quantitative tools to gauge market participants’ assessment of banking system resilience. These measures complement traditional balance-sheet metrics and suggest that markets consider large Canadian banks to be better placed to weather adverse shocks than banks in other advanced economies. Compared with regulatory capital ratios, however, the measures suggest less improvement in banking system resilience since the pre-crisis period.

  Content Type(s): Publications, Financial System Review articles Topic(s): Financial institutions, Financial markets, Financial stability JEL Code(s): G, G0, G01, G1, G10, G2, G21
• May 25, 2017

  Project Jasper: Are Distributed Wholesale Payment Systems Feasible Yet?

  Financial System Review - June 2017 James Chapman, Rodney J. Garratt, Scott Hendry, Andrew McCormack, Wade McMahon

  This report describes a joint endeavour between public and private sectors to explore a wholesale payment system based on distributed ledger technology (DLT). They find that a stand-alone DLT system is unlikely to be as beneficial as a centralized payment system in terms of core operating costs; however, it could increase financial system efficiency as a result of integration with the broader financial market infrastructure.

  Content Type(s): Publications, Financial System Review articles Topic(s): Digital currencies and fintech, Financial system regulation and policies, Payment clearing and settlement systems JEL Code(s): E, E4, E42, E5, E58, G, G2, G28

• Methodology for Assigning Credit Ratings to Sovereigns

  Staff Discussion Paper 2017-7 Philippe Muller, Jérôme Bourque

  The investment of foreign exchange reserves or other asset portfolios requires an assessment of the credit quality of investment counterparties. Traditionally, foreign exchange reserve and asset managers have relied on credit rating agencies (CRAs) as the main source for credit assessments.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Credit risk management, Foreign reserves management JEL Code(s): F, F3, F31, G, G2, G24, G28, G3, G32