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
Annex 3: DSGE Model Analysis documentation
Annex 4: BoC-GEM-FIN Analysis documentation
Annex 5: VAR Analysis Documentation

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