Financial institutions

• Credit Risk Transfer and Bank Insolvency Risk

  Staff Working Paper 2017-59 Maarten van Oordt

  The present paper shows that, everything else equal, some transactions to transfer portfolio credit risk to third-party investors increase the insolvency risk of banks. This is particularly likely if a bank sells the senior tranche and retains a sufficiently large first-loss position.

  Content Type(s): Staff research, Staff working papers Topic(s): Credit risk management, Financial institutions, Financial stability JEL Code(s): G, G2, G21, G28, G3, G32
• November 28, 2017

  Shoring Up the Foundations for a More Resilient Banking System: The Development of Basel III

  Financial System Review - November 2017 Sheryl King, Alexandra Lai, Tamara Gomes

  The authors trace the development of the Basel III standards for banking regulation. Basel III builds on two earlier frameworks, in response to weaknesses revealed during the global financial crisis. They highlight how implementation of the standards will underpin greater financial stability and provide a sound foundation for economic growth.

  Content Type(s): Publications, Financial System Review articles Topic(s): Financial institutions, Financial stability, Financial system regulation and policies JEL Code(s): G, G1, G2, G21, G28
• November 16, 2017

  Acceptance and Use of Payments at the Point of Sale in Canada

  Bank of Canada Review - Autumn 2017 Ben Fung, Kim Huynh, Anneke Kosse

  Merchants universally accept cash. Consumers widely hold cash but also carry debit and credit cards. The cost of using a method of payment has only a small influence on which method consumers use. Large merchants accept all payments, while only two-thirds of small and medium-sized businesses accept credit cards. Merchants report that credit cards are the costliest payment method compared with cash and debit cards. However, costs are not the only consideration. Merchant acceptance of credit accounts for the many con-sumers that want to use credit cards. This interaction between consumers and merchants is known as network externalities.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Bank notes, Digital currencies and fintech, Financial institutions, Payment clearing and settlement systems JEL Code(s): D, D2, D23, D24, E, E4, E41, E42, G, G2, G21, L, L2

• 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

• Do Canadian Broker-Dealers Act as Agents or Principals in Bond Trading?

  Staff Analytical Note 2017-11 Daniel Hyun, Jesse Johal, Corey Garriott

  Technology, risk tolerance and regulation may influence dealers to reduce their trading as principals (using their own balance sheets for sales and purchases of securities) in favour of agency trading (matching client trades).

  Content Type(s): Staff research, Staff analytical notes Topic(s): Financial institutions, Financial markets, Financial system regulation and policies, Market structure and pricing, Recent economic and financial developments JEL Code(s): G, G1, G14, G2, G20, L, L1

• Cross-Border Bank Flows and Monetary Policy: Implications for Canada

  Staff Working Paper 2017-34 Ricardo Correa, Teodora Paligorova, Horacio Sapriza, Andrei Zlate

  Using the Bank for International Settlements (BIS) Locational Banking Statistics data on bilateral bank claims from 1995 to 2014, we analyze the impact of monetary policy on cross-border bank flows. We find that monetary policy in a source country is an important determinant of cross-border bank flows.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions, Monetary policy JEL Code(s): F, F3, F34, F36, G, G0, G01

• Retrieving Implied Financial Networks from Bank Balance-Sheet and Market Data

  Staff Working Paper 2017-30 Jose Fique

  In complex and interconnected banking systems, counterparty risk does not depend only on the risk of the immediate counterparty but also on the risk of others in the network of exposures.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions, Financial stability JEL Code(s): C, C6, C63, D, D8, D85, G, G2, G21

• Information Contagion and Systemic Risk

  Staff Working Paper 2017-29 Co-Pierre Georg, Toni Ahnert

  We examine the effect of ex-post information contagion on the ex-ante level of systemic risk defined as the probability of joint bank default.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions, Financial stability JEL Code(s): G, G0, G01, G1, G11, G2, G21

• Fintech: Is This Time Different? A Framework for Assessing Risks and Opportunities for Central Banks

  Staff Discussion Paper 2017-10 Meyer Aaron, Francisco Rivadeneyra, Samantha Sohal

  We investigate the risks and opportunities to the mandates of central banks arising from fintech developments.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Central bank research, Digital currencies and fintech, Financial institutions, Payment clearing and settlement systems JEL Code(s): E, E4, E42, G, G1, G2, L, L1
• 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