Financial System Review

Access our latest publication, or browse previous versions and their individual articles.

Published twice a year, the Bank’s Financial System Review (FSR) provides a detailed review of developments in the financial system and an analysis of policy directions in the financial sector.

June 2017 Preview

The June FSR will be released on 9 June 2017, but you can read an article about Project Jasper now.

25 May 2017 Project Jasper: Are Distributed Wholesale Payment Systems Feasible Yet?

Project Jasper: Are Distributed Wholesale Payment Systems Feasible Yet?, James Chapman, Rod Garratt, Scott Hendry, Andrew McCormack and Wade McMahon, describes a joint endeavour between public and private sectors to explore a wholesale payment system based on distributed ledger technology (DLT). They find that a stand-alone DLT system is unlikely to be as beneficial as a centralized payment system in terms of core operating costs; however, it could increase financial system efficiency as a result of integration with the broader financial market infrastructure.

Financial System Review - December 2016

Financial System Review - December 2016
Available as: PDF

This issue of the Financial System Review reflects the Bank’s judgment that the overall level of risk to Canada’s financial system remains largely unchanged from six months ago. The Bank continues to highlight two key vulnerabilities related to Canadian households: high levels of indebtedness and housing market imbalances. A third ongoing vulnerability is the potential for fragility in fixed-income market liquidity.

15 December 2016 Monitoring Shadow Banking in Canada: A Hybrid Approach

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.

15 December 2016 The Rise of Mortgage Finance Companies in Canada: Benefits and Vulnerabilities

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.

15 December 2016 Toward More Resilient Markets: Over-the-Counter Derivatives Reform in Canada

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.

Press Conference

Press conference by Governor Stephen S. Poloz and Senior Deputy Governor Carolyn Wilkins. (11:15 (ET) approx.).

Press Release

The overall level of risk to Canada’s financial system remains largely unchanged from six months ago, the Bank of Canada said today in the Financial System Review (FSR).

Opening Statement

Press conference following the release of the Financial System Review..

Mortgage Loan-to-Income Ratios

High levels of indebtedness have spread through Toronto, Vancouver and Calgary

A key vulnerability in the December 2016 Financial System Review is that of elevated levels of Canadian household indebtedness. The proportion of highly indebted households has continued to rise in most Canadian cities, particularly in Toronto and Vancouver.

This is illustrated by the geographical distribution of the average loan-to-income (LTI) ratio among newly–originated high-ratio mortgages. These maps show how average LTIs have evolved over the last three years in the Toronto, Vancouver and Calgary areas. Darker colours indicate more debt relative to income.

Toronto

Vancouver

Calgary

Note

The data includes all newly-originated high-ratio residential mortgages— where the amount of the loan exceeds 80 per cent of the value of the home. Regions where less than 10 high-ratio mortgages were issued during the year are listed as “no data available”. In some cases, this is because most home sales in an area have a value exceeding $1 million and are not eligible for high-ratio mortgages.

Sources

Department of Finance Canada; Postal CodeOM Conversion File (PCCF), 2016. Statistics Canada Catalogue no. 92-154-X; Forward Sortation Area Boundary File, 2011 Census. Statistics Canada Catalogue no. 92-179-X; Google; Bank of Canada calculations.

The Risk of Household Financial Stress and a Sharp Correction in House Prices

About

Follow the Bank