Financial stability

• May 25, 2017

  Upgrading the Payments Grid: The Payoffs Are Greater Than You Think

  Remarks Sylvain Leduc Payments Canada Toronto, Ontario

  Deputy Governor Sylvain Leduc discusses how upgrading Canada’s core payment systems will contribute to financial stability and help the Bank keep inflation on target.

  Content Type(s): Press, Speeches and appearances, Remarks Research Topic(s): Financial markets, Financial stability, Financial system regulation and policies, Monetary policy implementation, Payment clearing and settlement systems
• March 2, 2017

  Thermometer Rising—Climate Change and Canada’s Economic Future

  Remarks Timothy Lane Finance and Sustainability Initiative Montréal, Quebec

  Deputy Governor Tim Lane discusses the implications of climate change—and actions to address it—for Canada’s economy and financial system.

  Content Type(s): Press, Speeches and appearances, Remarks Research Topic(s): Central bank research, Climate change, Financial markets, Financial stability, Financial system regulation and policies, International financial markets, International topics

• Optimal Capital Regulation

  Staff Working Paper 2017-6 Stéphane Moyen, Josef Schroth

  We study constrained-efficient bank capital regulation in a model with market-imposed equity requirements. Banks hold equity buffers to insure against sudden loss of access to funding. However, in the model, banks choose to only partially self-insure because equity is privately costly.

  Content Type(s): Staff research, Staff working papers Research Topic(s): Credit and credit aggregates, Financial institutions, Financial stability, Financial system regulation and policies JEL Code(s): E, E1, E13, E3, E32, E4, E44

• Terms-of-Trade and House Price Fluctuations: A Cross-Country Study

  Staff Working Paper 2017-1 Paul Corrigan

  Terms-of-trade shocks are known to be key drivers of business cycles in open economies. This paper argues that terms-of-trade shocks were also important for house price fluctuations in a panel of developed countries over the 1994–2015 period.

  Content Type(s): Staff research, Staff working papers Research Topic(s): Financial stability, Housing, International topics JEL Code(s): C, C3, C32, E, E3, E32, E5, E51, F, F3, F36, F4, F41

• Monetary Policy, Private Debt and Financial Stability Risks

  Staff Working Paper 2016-59 Gregory Bauer, Eleonora Granziera

  Can monetary policy be used to promote financial stability? We answer this question by estimating the impact of a monetary policy shock on private-sector leverage and the likelihood of a financial crisis. Impulse responses obtained from a panel VAR model of 18 advanced countries suggest that the debt-to-GDP ratio rises in the short run following an unexpected tightening in monetary policy.

  Content Type(s): Staff research, Staff working papers Research Topic(s): Credit and credit aggregates, Financial stability, Monetary policy, Monetary policy transmission JEL Code(s): C, C2, C21, C23, E, E5, E52, E58
• December 15, 2016

  Release of the Financial System Review

  Opening statement Stephen S. Poloz Ottawa, Ontario

  Press conference following the release of the Financial System Review.

  Content Type(s): Press, Speeches and appearances, Opening statements Research Topic(s): Credit and credit aggregates, Financial stability, Financial system regulation and policies, Housing, Regional economic developments, Sectoral balance sheet
• December 15, 2016

  Toward More Resilient Markets: Over-the-Counter Derivatives Reform in Canada

  Financial System Review - December 2016 Michael Mueller, André Usche

  In Toward More Resilient Markets: Over-the-Counter Derivatives Reform in Canada, Michael Mueller and André Usche show that the implementation of derivatives market reforms in Canada is well under way and has lessened vulnerabilities. But accompanying changes to market structure have both positive and negative effects that require ongoing attention from authorities.

  Content Type(s): Publications, Financial System Review articles Research Topic(s): Financial markets, Financial stability, Financial system regulation and policies JEL Code(s): G, G0, G01, G1, G15, G2, G28
• December 15, 2016

  The Rise of Mortgage Finance Companies in Canada: Benefits and Vulnerabilities

  Financial System Review - December 2016 Donald Coletti, Marc-André Gosselin, Cameron MacDonald

  The Rise of Mortgage Finance Companies in Canada: Benefits and Vulnerabilities, by Don Coletti, Marc-André Gosselin and Cameron MacDonald, examines the increased importance of mortgage finance companies (MFCs) in the Canadian mortgage market. The authors discuss the MFC business model, highlighting MFCs’ relationship with mortgage brokers and banks, as well as the benefits they bring to Canadian borrowers. The authors conclude with a discussion of the impact of MFCs on financial system vulnerabilities.

  Content Type(s): Publications, Financial System Review articles Research Topic(s): Financial institutions, Financial stability, Financial system regulation and policies JEL Code(s): G, G2, G23
• December 15, 2016

  Monitoring Shadow Banking in Canada: A Hybrid Approach

  Financial System Review - December 2016 Bo Young Chang, Gitanjali Kumar, André Usche, Michael Januska

  In Monitoring Shadow Banking in Canada: A Hybrid Approach, Bo Young Chang, Michael Januska, Gitanjali Kumar and André Usche discuss how lending that occurs outside the traditional banking system provides benefits to the economy but must be monitored carefully for potential financial sector vulnerabilities. They describe how the Bank defines and measures shadow banking and how it assesses vulnerabilities in the sector, using an approach that examines both markets and entities.

  Content Type(s): Publications, Financial System Review articles Research Topic(s): Financial institutions, Financial markets, Financial stability JEL Code(s): G, G0, G01, G2, G23

• Bank Screening Heterogeneity

  Staff Working Paper 2016-56 Thibaut Duprey

  Production efficiency and financial stability do not necessarily go hand in hand. With heterogeneity in banks’ abilities to screen borrowers, the market for loans becomes segmented and a self-competition mechanism arises. When heterogeneity increases, the intensive and extensive margins have opposite effects.

  Content Type(s): Staff research, Staff working papers Research Topic(s): Financial institutions, Financial stability, Financial system regulation and policies JEL Code(s): G, G1, G14, G2, G21, L, L1, L13