Calibrating the Magnitude of the Countercyclical Capital Buffer Using Market-Based Stress Tests Staff Working Paper 2018-54 Maarten van Oordt How much capital do banks need as a buffer to absorb severe shocks? By using historical stock market data, market-based stress tests help estimate the magnitude of capital buffers necessary to absorb severe but plausible shocks. Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions, Financial stability, Financial system regulation and policies JEL Code(s): G, G1, G10, G2, G21, G28
Government of Canada Fixed-Income Market Ecology Staff Discussion Paper 2018-10 Léanne Berger-Soucy, Corey Garriott, André Usche This discussion paper is the third in the Financial Markets Department’s series on the structure of Canadian financial markets. These papers are called “ecologies” because they study the interactions among market participants, infrastructures, regulations and the terms of the traded contract itself. Content Type(s): Staff research, Staff discussion papers Topic(s): Debt management, Financial institutions, Financial markets, Financial services JEL Code(s): G, G1, G10, G2, G20, H, H6, H63
The BoC-BoE Sovereign Default Database Revisited: What’s New in 2018? Staff Working Paper 2018-30 David Beers, Jamshid Mavalwalla Until recently, there have been few efforts to systematically measure and aggregate the nominal value of the different types of sovereign government debt in default. To help fill this gap, the Bank of Canada’s Credit Rating Assessment Group (CRAG) has developed a comprehensive database of sovereign defaults posted on the Bank of Canada’s website that now is updated in partnership with the Bank of England. Content Type(s): Staff research, Staff working papers Topic(s): Debt management, Development economics, Financial stability, International financial markets JEL Code(s): F, F3, F34, G, G1, G10, G14, G15
June 7, 2018 Establishing a Resolution Regime for Canada’s Financial Market Infrastructures Financial System Review - June 2018 Elizabeth Woodman, Lucia Chung, Nikil Chande This report highlights how an effective resolution regime promotes financial stability. It does this by ensuring that financial market infrastructures (FMIs) would be able to continue to provide their critical functions during a period of stress when an FMI’s own recovery measures were failing. The report explains the Bank of Canada’s new role as the resolution authority for FMIs, which will further bolster financial system resilience. Content Type(s): Publications, Financial System Review articles Topic(s): Financial institutions, Financial markets, Financial stability, Financial system regulation and policies, Payment clearing and settlement systems JEL Code(s): G, G1, G10, G19, G2, G20, G28, G29
Adverse Selection with Heterogeneously Informed Agents Staff Working Paper 2018-7 Mohammad Davoodalhosseini A model of over-the-counter markets is proposed. Some asset buyers are informed in that they can identify high quality assets. Heterogeneous sellers with private information choose what type of buyers they want to trade with. Content Type(s): Staff research, Staff working papers Topic(s): Economic models, Financial markets, Financial stability, Financial system regulation and policies, Market structure and pricing JEL Code(s): D, D4, D40, D8, D82, D83, G, G0, G01, G1, G10, G2, G20
The Government of Canada Debt Securities Data Set Technical Report No. 112 Jeffrey Gao, Francisco Rivadeneyra, Gabriel Rodriguez Rondon We present the daily time series of the outstanding amounts of all Government of Canada marketable debt securities from July 2001 to June 2017. Content Type(s): Staff research, Technical reports Topic(s): Debt management, Econometric and statistical methods, Financial markets JEL Code(s): C, C8, C80, G, G1, G10, H, H6, H63
Complementing the Credit Risk Assessment of Financial Counterparties with Market-Based Indicators Staff Analytical Note 2017-15 Guillaume Ouellet Leblanc, Maarten van Oordt The Bank’s internal credit risk assessment abilities are regularly enhanced. In this note, we present a recent innovation that extends the set of market-based indicators used in the credit risk assessment of financial counterparties. Content Type(s): Staff research, Staff analytical notes Topic(s): Credit risk management, Financial institutions JEL Code(s): G, G1, G10, G2, G24
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 11, 2017 Wholesale Funding of the Big Six Canadian Banks Bank of Canada Review - Spring 2017 Matthieu Truno, Andriy Stolyarov, Danny Auger, Michel Assaf The Big Six Canadian banks are a dominant component of the Canadian financial system. How they finance their business activities is fundamental to how effective they are. Retail and commercial deposits along with wholesale funding represent the two major sources of funds for Canadian banks. What wholesale funding instruments do the Big Six banks use? How do they choose between different funding sources, funding strategies and why? How have banks changed their funding mix since the 2007–09 global financial crisis? Content Type(s): Publications, Bank of Canada Review articles Topic(s): Financial institutions, Financial markets, Financial system regulation and policies, Market structure and pricing, Wholesale funding JEL Code(s): E, E4, E44, F, F3, G, G0, G01, G1, G10, G12, G15, G2, G20, G21, G28, O, O1, O16
Repo Market Functioning when the Interest Rate Is Low or Negative Staff Discussion Paper 2017-3 Jean-Sébastien Fontaine, James Hately, Adrian Walton This paper investigates how a low or negative overnight interest rate might affect the Canadian repo markets. The main conclusion is that the repo market for general collateral will continue to function effectively. Content Type(s): Staff research, Staff discussion papers Topic(s): Financial markets, Interest rates, Market structure and pricing JEL Code(s): D, D4, G, G1, G10, G12