Strengthening International Capital and Liquidity Standards: A Macroeconomic Impact Assessment for Canada
G-20 leaders have agreed on comprehensive financial sector reforms to reduce the risk of future crises and to strengthen banking systems. Raising the amount and quality of capital and liquidity that financial institutions must carry is a central component of the reforms. The G-20 is developing a set of proposals for agreement by leaders at their Summit in Seoul, Korea, in November.
To determine the appropriate calibration of the proposed new standards, the Financial Stability Board (FSB) and the Basel Committee on Banking Supervision (BCBS) conducted two studies to evaluate the macroeconomic impact of the proposals. These studies assessed the benefits and costs of the new standards over (i) the longer-term period when the proposals are fully implemented and (ii) the initial transition period during which the new standards will be introduced.
Bank of Canada staff participated in both international studies. The Bank also carried out its own assessment of the implications of these new standards for the Canadian financial system and economy.
This report summarizes the Bank's key results for Canada and compares them with the results recently published by the FSB and the BCBS.
Annex 1:
Annex 2: ToTEM Analysis documentation
- Non-Technical Description: Assessing the Macroeconomic Impact of Stronger Capital and Liquidity Requirements in Canada: Insights from ToTEM
- Technical Paper: Assessing the Macroeconomic Impact of Stronger Capital and Liquidity Requirements in Canada: Insights from ToTEM
- Technical Report No. 97: ToTEM: The Bank of Canada's New Quarterly Projection Model
Annex 3: DSGE Model Analysis documentation
- Tighter Capital Requirement in Canada: A Non-Technical Summary of the Insights from the Christensen-Meh-Moran Bank Capital Model
- Journal Article: The role of bank capital in the propagation of shocks
Annex 4: BoC-GEM-FIN Analysis documentation
- Assessing the Spillover Effects of Changes in Bank Capital Regulation Using BoC-GEM-Fin: A Non-Technical Description
- The Macroeconomic Implications of Changes in Bank Capital and Liquidity Requirements in Canada: Insights from BoC-GEM-Fin
- Technical Report No. 98: The Bank of Canada's Version of the Global Economy Model (BoC-GEM)
- Forthcoming Working Paper: Banks, Credit Market Frictions, and Business Cycles