Understanding the Systemic Implications of Climate Transition Risk: Applying a Framework Using Canadian Financial System Data Staff Discussion Paper 2023-32 Gabriel Bruneau, Javier Ojea Ferreiro, Andrew Plummer, Marie-Christine Tremblay, Aidan Witts Our study aims to gain insight on financial stability and climate transition risk. We develop a methodological framework that captures the direct effects of a stressful climate transition shock as well as the indirect—or systemic—implications of these direct effects. We apply this framework using data from the Canadian financial system. Content Type(s): Staff research, Staff discussion papers Topic(s): Climate change, Economic models, Financial institutions, Financial markets, Financial stability JEL Code(s): C, C6, C63, G, G0, G01, G1, G10, G2, G20, 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
Central Bank Crisis Interventions: A Review of the Recent Literature on Potential Costs Staff Discussion Paper 2023-30 Patrick Aldridge, David Cimon, Rishi Vala Central banks’ actions to stabilize financial markets and implement monetary policy during crises may come with costs and side effects. We provide a literature review of these costs and discuss measures that may mitigate the negative impacts of crisis actions. Content Type(s): Staff research, Staff discussion papers Topic(s): Central bank research, Financial institutions, Financial markets, Financial stability, Lender of last resort JEL Code(s): E, E5, E58, G, G1, G10, G2, G20
November 9, 2023 Getting used to higher interest rates Speech summary Carolyn Rogers Advocis Vancouver Vancouver, British Columbia Senior Deputy Governor Carolyn Rogers talks about why interest rates could settle at a higher level than Canadians are used to and why preparing early for that possible outcome is important. Content Type(s): Press, Speeches and appearances, Speech summaries Topic(s): Credit risk management, Financial institutions, Financial markets, Financial stability, Firm dynamics, Interest rates, Monetary and financial indicators, Recent economic and financial developments
November 9, 2023 Financial stability in a world of higher interest rates Remarks Carolyn Rogers Advocis Vancouver Vancouver, British Columbia Senior Deputy Governor Carolyn Rogers talks about financial stability in an era of higher interest rates. Content Type(s): Press, Speeches and appearances, Remarks Topic(s): Credit risk management, Financial institutions, Financial markets, Financial stability, Firm dynamics, Interest rates, Monetary and financial indicators, Recent economic and financial developments
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
Three things we learned about the Lynx payment system Staff Analytical Note 2023-14 Nikil Chande, Zhentong Lu, Hiru Rodrigo, Phoebe Tian Canada transitioned to a new wholesale payment system, Lynx, in August 2021. Lynx is based on a real-time settlement model that eliminates credit risk in the system. This model can require more liquidity; however, Lynx’s design allows Canada’s wholesale payments to settle efficiently. Content Type(s): Staff research, Staff analytical notes Topic(s): Financial institutions, Financial services, Financial system regulation and policies, Payment clearing and settlement systems JEL Code(s): C, C1, C10, E, E4, E42, G, G2, G28
Intermediary Market Power and Capital Constraints Staff Working Paper 2023-51 Jason Allen, Milena Wittwer We examine how intermediary capitalization affects asset prices in a framework that allows for intermediary market power. We introduce a model in which capital-constrained intermediaries buy or trade an asset in an imperfectly competitive market, and we show that weaker capital constraints lead to both higher prices and intermediary markups. Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions, Market structure and pricing JEL Code(s): D, D4, D40, D44, G, G1, G12, G18, G2, G20, L, L1, L10
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
May 18, 2023 Release of the Financial System Review Opening statement Tiff Macklem, Carolyn Rogers Ottawa, Ontario Press conference following the release of the Financial System Review. Content Type(s): Press, Speeches and appearances, Opening statements Topic(s): Financial institutions, Financial markets, Financial stability, Financial system regulation and policies, Interest rates, International financial markets, Recent economic and financial developments, Wholesale funding