G2 - Financial Institutions and Services

• June 11, 2015

  Canadian Open-End Mutual Funds: An Assessment of Potential Vulnerabilities

  Financial System Review - June 2015 Sandra Ramirez, Jesus Sierra, Jonathan Witmer

  The authors examine the liquidity and leverage characteristics of Canadian long-term, open-end mutual funds in terms of their potential systemic effects on the Canadian mutual fund sector and on the Canadian financial system more broadly. In their overall assessment of this sector, they consider the regulation, market size and ownership structure of mutual funds in Canada and provide observations about the industry globally.

  Content Type(s): Publications, Financial System Review articles Topic(s): Financial institutions, Financial markets JEL Code(s): G, G2, G23, G28

• Testing for the Diffusion Matrix in a Continuous-Time Markov Process Model with Applications to the Term Structure of Interest Rates

  Staff Working Paper 2015-17 Fuchun Li

  The author proposes a test for the parametric specification of each component in the diffusion matrix of a d-dimensional diffusion process. Overall, d (d-1)/2 test statistics are constructed for the off-diagonal components, while d test statistics are constructed for the main diagonal components.

  Content Type(s): Staff research, Staff working papers Topic(s): Asset pricing, Econometric and statistical methods, Interest rates JEL Code(s): C, C1, C12, C14, E, E1, E17, E4, E43, G, G1, G12, G2, G20
• May 14, 2015

  Improving the Foundation of Canada’s Payments System

  Bank of Canada Review - Spring 2015 Lana Embree, Paul Miller

  The Canadian payments environment has evolved with enhancements in technology, changes in user expectations and new regulatory standards. In response, the existing regulatory framework and core payments infrastructure are being enhanced. This article describes several revisions to the governance and regulation of the payments system as well as plans to update the core payments infrastructure. These initiatives will position the Canadian payments system to more effectively support a modern and vibrant economy by serving the payments needs of Canadians safely and efficiently as the payments industry continues to evolve.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Financial system regulation and policies, Payment clearing and settlement systems JEL Code(s): E, E4, E42, G, G2, G28
• May 14, 2015

  The “Bank” at the Bank of Canada

  Bank of Canada Review - Spring 2015 Thérèse Couture, Christian Bélisle

  In this article, we describe the various types of banking services (payments, settlement and safekeeping) that the Bank of Canada provides to different types of clients (the Government of Canada, financial market infrastructures, financial institutions, foreign central banks and the Canada Deposit Insurance Corporation). We also explain the reasons the Bank provides these services and how this role supports its core mandates, in particular financial stability. Finally, we explore the factors driving the growth and evolution in the provision of these banking services.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Financial services, Foreign reserves management, Payment clearing and settlement systems JEL Code(s): E, E5, E50, G, G2, G20
• May 14, 2015

  The Use of Cash in Canada

  Bank of Canada Review - Spring 2015 Ben Fung, Kim Huynh, Gerald Stuber

  The Bank of Canada’s 2013 Methods-of-Payment Survey indicates that the share of cash in the overall number of retail transactions has continued to decrease, mainly because of increased use of contactless credit cards. The share of cash in the total value of retail transactions was virtually unchanged from 2009 to 2013. In particular, the value share of cash transactions above $50 increased. Automated banking machines (ABMs), still the major source of cash for Canadians, were used less often in 2013 than in 2009. Cash use in Canada is broadly similar to that in Australia and the United States.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Bank notes, Digital currencies and fintech, Econometric and statistical methods, Financial system regulation and policies, Payment clearing and settlement systems JEL Code(s): C, C8, C83, E, E4, E42, G, G2, G21, L, L8, L81

• Effects of Funding Portfolios on the Credit Supply of Canadian Banks

  Staff Working Paper 2015-10 H. Evren Damar, Césaire Meh, Yaz Terajima

  This paper studies how banks simultaneously manage the two sides of their balance sheet and its implications for bank risk taking and real economic activity. First, we analyze how changes in funding affect the supply of bank loans.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions, Financial stability, Financial system regulation and policies, Monetary policy implementation JEL Code(s): E, E5, E52, G, G2, G21

• Securitization under Asymmetric Information over the Business Cycle

  Staff Working Paper 2015-9 Martin Kuncl

  This paper studies the efficiency of financial intermediation through securitization in a model with heterogeneous investment projects and asymmetric information about the quality of securitized assets. I show that when retaining part of the risk, the issuer of securitized assets may credibly signal its quality.

  Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Credit and credit aggregates, Economic models, Financial markets, Financial stability, Financial system regulation and policies JEL Code(s): E, E3, E32, E4, E44, G, G0, G01, G2, G20

• Immigrants and Mortgage Delinquency in the United States

  Staff Working Paper 2015-1 Zhenguo Lin, Yingchun Liu, Jia Xie

  We investigate the relationship between immigrant status and mortgage delinquency in the United States.

  Content Type(s): Staff research, Staff working papers Topic(s): Debt management, Financial stability JEL Code(s): G, G2, G21, J, J1, J15
• December 10, 2014

  Exchange-Traded Funds: Evolution of Benefits, Vulnerabilities and Risks

  Financial System Review - December 2014 Ian Foucher, Kyle Gray

  Ian Foucher and Kyle Gray explain the different types of exchange-traded funds (ETFs), which present both benefits and risks for investors. They discuss ways in which the risk characteristics of certain ETF products could have broader implications for the financial system, and describe the evolution of ETF market structure and regulation in different jurisdictions as authorities try to mitigate risks related to ETFs.

  Content Type(s): Publications, Financial System Review articles Topic(s): Financial markets, Financial stability, Market structure and pricing JEL Code(s): G, G1, G14, G18, G2, G20
• December 10, 2014

  Cyber Security: Protecting the Resilience of Canada’s Financial System

  Financial System Review - December 2014 Harold Gallagher, Wade McMahon, Ron Morrow

  Harold Gallagher, Wade McMahon and Ron Morrow examine the various sources of cyber attacks and their potential for systemic risk. Against this background, the report highlights efforts being made to protect against cyber-security threats, including individual and collective actions by financial institutions and financial market infrastructures, as well as initiatives by international organizations, regulatory authorities and governments. The authors then describe the coordination, under the Joint Operational Resilience Management program, of private and public sector actions in Canada for managing and testing capabilities during severe operational events such as cyber attacks.

  Content Type(s): Publications, Financial System Review articles Topic(s): Financial stability, Financial system regulation and policies, Payment clearing and settlement systems JEL Code(s): G, G2, G20, G23, G28