Senior Deputy Governor Carolyn A. Wilkins talks about the recent strengthening of Canada’s financial system. Because of this strength, we are in a good position to deal with whatever unfolds, despite concerns about global growth, household debt and the housing market.
Watch Senior Deputy Governor Wilkins speak to The International Finance Club of Montreal. Read the full speech.
Canada is ready to face a global storm
Even though businesses are facing uncertainty about trade, and regions that depend on oil and gas are still suffering, Canada’s economy is in a relatively good place overall.
It is reassuring that should a storm arrive, the Canadian economy and financial system are in a good position to weather it.
We’ve learned from the past
In the past few years, changes to mortgage rules, along with higher interest rates, have helped slow the accumulation of debt by Canadians and cooled the housing market. But these are still our biggest vulnerabilities, and we’ll be watching them closely.
This is not the time to let our guard down though. Robust defences are especially important when difficulties abroad could affect us at home.
The global context has worsened
While we do not forecast a recession as the most likely outcome, the trade war and high levels of global debt could cause financial stress around the world. An increase in uncertainty or bad news about trade could trigger an economic downturn. This would in turn push down prices for assets such as housing and make it harder for businesses and families to borrow.
The global context has worsened, increasing risks to the global expansion and chances of financial stress.
Our banks are resilient
We have conducted stress tests to ensure that our financial system can withstand a severe shock, such as a deep recession that causes a sharp rise in unemployment and comes with a steep drop in housing prices. Steps taken in recent years have made our banks more resilient.
We are researching climate change
Today we released a multi-year research plan to better understand how climate risks are shaping the economy and financial system. We are looking at the impact of severe weather events and the move to a low-carbon economy. We also want to look at the impact climate change could have on financial stability.
This is the start of a long journey, and we are partnering with others to make progress.