Financial stability

• 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 Research Topic(s): Financial institutions, Financial stability JEL Code(s): C, C1, C15, G, G2, G21, G3, G33

• The Role of Debt and Equity Finance over the Business Cycle

  Staff Working Paper 2006-45 Francisco Covas, Wouter den Haan

  The authors show that debt and equity issuance are procyclical for most listed U.S. firms.

  Content Type(s): Staff research, Staff working papers Research Topic(s): Business fluctuations and cycles, Financial stability JEL Code(s): E, E3, G, G1, G3

• Linking Real Activity and Financial Markets: The Bonds, Equity, and Money (BEAM) Model

  Staff Working Paper 2006-42 Céline Gauthier, Fuchun Li

  The authors estimate a small monthly macroeconometric model (BEAM, for bonds, equity, and money) of the Canadian economy built around three cointegrating relationships linking financial and real variables over the 1975–2002 period.

  Content Type(s): Staff research, Staff working papers Research Topic(s): Financial markets, Financial stability JEL Code(s): C, C5, E, E4

• Risk-Cost Frontier and Collateral Valuation in Securities Settlement Systems for Extreme Market Events

  Staff Working Paper 2006-17 Alejandro García, Ramazan Gençay

  The authors examine how the use of extreme value theory yields collateral requirements that are robust to extreme fluctuations in the market price of the asset used as collateral.

  Content Type(s): Staff research, Staff working papers Research Topic(s): Econometric and statistical methods, Financial stability, Payment clearing and settlement systems JEL Code(s): C, C1, G, G0, G1

• An Empirical Analysis of Foreign Exchange Reserves in Emerging Asia

  Staff Working Paper 2005-38 Marc-André Gosselin, Nicolas Parent

  Over the past few years, the ability of the United States to finance its current account deficit has been facilitated by massive purchases of U.S.

  Content Type(s): Staff research, Staff working papers Research Topic(s): Econometric and statistical methods, Financial stability, International topics JEL Code(s): C, C2, C23, F, F3, F31, G, G1, G15

• Pocket Banks and Out-of-Pocket Losses: Links between Corruption and Contagion

  Staff Working Paper 2005-23 Raphael Solomon

  The author describes a model with a corrupt banking system, in which bankers knowingly lend at market interest rates to back projects riskier than the market rate indicates.

  Content Type(s): Staff research, Staff working papers Research Topic(s): Financial institutions, Financial stability JEL Code(s): D, D8, D82, G, G1, G19, G2, G21
• December 25, 2004

  The Bank of Canada as Lender of Last Resort

  Bank of Canada Review - Winter 2004-2005 Fred Daniel, Walter Engert, Dinah Maclean

  As the ultimate provider of Canadian-dollar liquidity to the financial system, the Bank of Canada has the unique capacity to create Canadian-dollar claims on the central bank and the power to make secured loans or advances to chartered banks and other members of the Canadian Payments Association. The Bank supplies overnight credit on a routine basis through the Standing Liquidity Facility (SLF) to direct participants in the Large Value Transfer System, and Emergency Lending Assistance (ELA) to solvent deposit-taking institutions that require more substantial and prolonged credit. The authors review the policy framework that guides the Bank's lender-of-last-resort function, including the key issues, terms and conditions, and eligibility criteria associated with its SLF and ELA activities. Also discussed are foreign currency ELA, the relationship between SLF and ELA, systemic risk and Bank of Canada intervention, and the potential provision of liquidity to major clearing and settlement systems.

  Content Type(s): Publications, Bank of Canada Review articles Research Topic(s): Financial stability, Lender of last resort, Payment clearing and settlement systems
• December 23, 2004

  Bank of Canada Lender-of-Last-Resort Policies

  Financial System Review - December 2004

  The Bank of Canada has distinct roles as a lender of last resort. This article outlines how and under what circumstances the Bank can routinely provide liquidity to facilitate payment settlement, as well as the various ways it can respond in more exceptional situations.

  Content Type(s): Publications, Financial System Review articles Research Topic(s): Financial stability, Lender of last resort, Payment clearing and settlement systems