Financial services

• November 22, 2004

  The Evolving Financial System and Public Policy: Conference Highlights and Lessons

  Bank of Canada Review - Autumn 2004 Pierre St-Amant, Carolyn A. Wilkins

  At the 12th annual Bank of Canada economic conference, held in Ottawa on 4 and 5 December 2003, representatives from various public and private organizations and Bank of Canada staff discussed papers presented on three key issues affecting the financial system: financial contagion, the implications of bank diversification, and financial sector regulation. Papers on financial contagion studied the effect of globalization on Canadian foreign-asset exposures, developed a general-equilibrium model of a competitive interfirm lending market in which firms can borrow or lend, and used market-based indicators to determine the probability that contagion can be generated by interbank exposures. The papers on bank diversification focused on the links between the changing behaviour of financial institutions and risk-return trade-offs. Issues of financial sector regulation included the relationship between governance and financial sector soundness, the theoretical basis of bank regulations for capital requirements, and the implications of bank capital requirements for the transmission of monetary policy. A panel discussion provided extended discussion of the conference papers.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Financial institutions, Financial markets, Financial services
• August 24, 2004

  The Efficiency of Canadian Capital Markets: Some Bank of Canada Research

  Bank of Canada Review - Summer 2004 Scott Hendry, Michael R. King

  Capital markets and their related financial instruments make an important contribution to the welfare of Canadians. The Bank of Canada is interested in the efficient functioning of capital markets through each of its responsibilities for monetary policy, the financial system, and funds management. Hendry and King highlight the key findings of Bank research published over the past year that addresses capital market efficiency and summarize lessons that have been learned. The research conducted thus far suggests that Canadian capital markets are efficient for a capital market of Canada's size but are less diverse than the U.S. capital markets, indicating that there is room for improvement in certain areas.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Financial markets, Financial services, Interest rates, Market structure and pricing

• Regulatory Changes and Financial Structure: The Case of Canada

  Staff Working Paper 2004-26 Christian Calmès

  The author documents some stylized facts about the Canadian financial structure. He explores these empirical facts in the context of Canadian financial legislation and finds that, over the 1990s, Canadian businesses became more heavily dependent on financial markets as their primary source of external funding.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions, Financial services, Recent economic and financial developments JEL Code(s): G, G2, G20, G21

• Competition in Banking: A Review of the Literature

  Staff Working Paper 2004-24 Carol Ann Northcott

  The author reviews the theoretical and empirical literature to examine the traditional perception that the following trade-off exists between economic efficiency and stability in the banking system: a competitive banking system is more efficient and therefore important to growth, but market power is necessary for stability in the banking system.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions, Financial services, Market structure and pricing JEL Code(s): G, G2, G21, G28, L, L1, L11, L12, L13, L16