Financial institutions

• April 13, 2007

  The Large-Value Payments System: Insights from Selected Bank of Canada Research

  Bank of Canada Review - Spring 2007 Neville Arjani, Walter Engert

  Given the Bank of Canada's strong interest in the safe and efficient operation of major clearing and settlement systems, the Bank maintains a rigorous research agenda as a means of informing payments system policy and oversight. In this article, Arjani and Engert review recent research undertaken by Bank staff concerning the risk and efficiency of the Large Value Transfer System (LVTS). Based on the findings from this research, the authors conclude that the design of the LVTS strikes an effective balance between risk and efficiency. The article also demonstrates the increased use of simulation analysis as a tool for conducting payments system research. A brief summary of the Bank's oversight strategy for systemically important payments systems is also provided. Goals for future research are noted as well, including modelling of participant behaviour and continued external collaboration with other researchers.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Financial institutions, Payment clearing and settlement systems

• Best Instruments for Market Discipline in Banking

  Staff Working Paper 2007-9 Greg Caldwell

  The author develops a dynamic model of banking competition to determine which capital instrument is most effective in disciplining banks' risk choice. Comparisons are conducted between equity, subordinated debentures (SD), and uninsured deposits (UD) as funding sources.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions JEL Code(s): G, G2, G21, G28

• Stress Testing the Corporate Loans Portfolio of the Canadian Banking Sector

  Staff Working Paper 2006-47 Miroslav Misina, David Tessier, Shubhasis Dey

  Stress testing, at its most general level, is an investigation of the performance of an entity under abnormal operating conditions.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions, Financial stability JEL Code(s): C, C1, C15, G, G2, G21, G3, G33

• Credit in a Tiered Payments System

  Staff Working Paper 2006-36 Alexandra Lai, Nikil Chande, Sean O'Connor

  Payments systems are typically characterized by some degree of tiering, with upstream firms (clearing agents) providing settlement accounts to downstream institutions that wish to clear and settle payments indirectly in these systems (indirect clearers).

  Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions, Financial services, Market structure and pricing, Payment clearing and settlement systems JEL Code(s): G, G2, G21, L, L1, L12, L13, L2, L22

• Are Canadian Banks Efficient? A Canada–U.S. Comparison

  Staff Working Paper 2006-33 Jason Allen, Walter Engert, Ying Liu

  The authors compare the efficiency of Canada's largest banks with U.S. commercial banks over the past 20 years. Efficiency is measured in three ways.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions JEL Code(s): C, C3, C33, D, D2, D24, G, G2, G21

• Assessing and Valuing the Non-Linear Structure of Hedge Fund Returns

  Staff Working Paper 2006-31 Antonio Diez de los Rios, René Garcia

  Several studies have put forward the non-linear structure and option-like features of returns associated with hedge fund strategies.

  Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, Financial institutions JEL Code(s): C, C1, C5, G, G1

• Ownership Concentration and Competition in Banking Markets

  Staff Working Paper 2006-7 Alexandra Lai, Raphael Solomon

  Many countries prohibit large shareholdings in their domestic banks.The authors examine whether such a restriction restrains competition in a duopolistic loan market. Blockholders may influence managers' output decisions by choosing capital structure, as in Brander and Lewis (1986).

  Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions, Financial services, Financial system regulation and policies JEL Code(s): G, G2, G21, G28, G3, G32, L, L1, L10

• Order Submission: The Choice between Limit and Market Orders

  Staff Working Paper 2005-42 Ingrid Lo, Stephen Sapp

  Most financial markets allow investors to submit both limit and market orders, but it is not always clear what affects the choice of order type.

  Content Type(s): Staff research, Staff working papers Topic(s): Exchange rates, Financial institutions, Market structure and pricing JEL Code(s): D, D4, G, G1

• Subordinated Debt and Market Discipline in Canada

  Staff Working Paper 2005-40 Greg Caldwell

  The author documents the use by Canadian banks of subordinated debt (SD) as a capital instrument.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions JEL Code(s): G, G2, G21, G28

• Degree of Internationalization and Performance: An Analysis of Canadian Banks

  Staff Working Paper 2005-32 Walid Hejazi, Eric Santor

  The international business literature measures the link between the degree of internationalization (DOI) of a firm's activities and its performance.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions JEL Code(s): F, F2, F23, G, G2, G21