Financial institutions

• Loan Insurance, Market Liquidity, and Lending Standards

  Staff Working Paper 2019-47 Toni Ahnert, Martin Kuncl

  We examine loan insurance—credit risk transfer upon origination—in a model in which lenders can screen, learn loan quality over time, and can sell loans. Some lenders with low screening ability insure, benefiting from higher market liquidity of insured loans while forgoing the option to exploit future information about loan quality.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions, Financial markets, Financial system regulation and policies JEL Code(s): G, G0, G01, G2, G21, G28

• Assessment of Liquidity Creation in the Canadian Banking System

  Staff Analytical Note 2019-30 Annika Gnann, Sahika Kaya

  Liquidity creation is a fundamental function of banks. It provides the public with easy access to funds. These funds are important because they allow households and businesses to consume and invest. In this note, we measure liquidity creation by Canadian financial institutions from the first quarter of 2012 to the second quarter of 2019, using a methodology suggested by Berger and Bouwman (2009) and known as the BB measure.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Financial institutions, Financial stability, Monetary and financial indicators JEL Code(s): G, G2, G21, G28, G3, G32
• November 19, 2019

  Financial Stability in an Uncertain World (Full Remarks)

  Remarks Carolyn A. Wilkins International Finance Club of Montréal Montréal, Quebec

  Senior Deputy Governor Carolyn A. Wilkins provides an update on the Canadian financial system and discusses measures in place that increase its resilience in a challenging global environment.

  Content Type(s): Press, Speeches and appearances, Remarks Topic(s): Climate change, Financial institutions, Financial stability, Financial system regulation and policies, Housing, Trade integration
• November 19, 2019

  Financial stability in an uncertain world

  Speech summary Carolyn A. Wilkins The International Finance Club of Montreal Montréal, Quebec

  Senior Deputy Governor Carolyn A. Wilkins talks about the recent strengthening of Canada’s financial system.

  Content Type(s): Press, Speeches and appearances, Speech summaries Topic(s): Climate change, Financial institutions, Financial stability, Financial system regulation and policies, Trade integration

• Resolving Failed Banks: Uncertainty, Multiple Bidding & Auction Design

  Staff Working Paper 2019-30 Jason Allen, Robert Clark, Brent Hickman, Eric Richert

  Bank resolution is costly. In the United States, the Federal Deposit Insurance Corporation (FDIC) typically resolves failing banks by auction.

  Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, Financial institutions JEL Code(s): C, C5, C57, D, D4, D44, G, G2, G21

• Flight from Safety: How a Change to the Deposit Insurance Limit Affects Households’ Portfolio Allocation

  Staff Working Paper 2019-29 H. Evren Damar, Reint Gropp, Adi Mordel

  Deposit insurance protects depositors from failing banks, thus making insured deposits risk-free. When a deposit insurance limit is increased, some deposits that previously were uninsured become insured, thereby increasing the share of risk-free assets in households’ portfolios. This increase cannot simply be undone by households, because to invest in uninsured deposits, a household must first invest in insured deposits up to the limit. This basic insight is the starting point of the analysis in this paper.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions, Financial system regulation and policies JEL Code(s): D, D1, D14, G, G2, G21, G28, L, L5, L51

• The Effects of Inflation Targeting for Financial Development

  Staff Analytical Note 2019-21 Geoffrey R. Dunbar, Amy (Qijia) Li

  The adoption of inflation targeting (IT) by central banks leads to an increase of 10 to 20 percent in measures of financial development, with a lag. We also find evidence that the financial sector benefits of IT adoption were higher for early-adopting central banks.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Financial institutions, Inflation targets, Monetary policy transmission JEL Code(s): E, E4, E44, E5, E58

• Canadian Securities Lending Market Ecology

  Staff Discussion Paper 2019-5 Jesse Johal, Joanna Roberts, John Sim

  This is the fourth of the Financial Markets Department’s descriptions of Canadian financial industrial organization. The paper discusses the organization of the securities lending market in Canada. We outline key characteristics of securities lending contracts, participants in the securities lending market, the market infrastructures that support securities lending activities, and aggregated statistics describing the Canadian market.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Financial institutions, Financial markets, Financial system regulation and policies, Market structure and pricing JEL Code(s): G, G1, G18, G2, G21, G23

• Systemic Risk and Collateral Adequacy

  Staff Working Paper 2019-23 Radoslav Raykov

  Many derivatives markets use collateral requirements calculated with industry-standard but dated methods that are not designed with systemic risk in mind. This paper explores whether the conservative nature of conventional collateral requirements outweighs their lack of consideration of systemic risk.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions, Financial markets JEL Code(s): G, G1, G10, G2, G20

• Assessing the Resilience of the Canadian Banking System

  Staff Analytical Note 2019-16 Charles Gaa, Xuezhi Liu, Cameron MacDonald, Xiangjin Shen

  The stability of the Canadian financial system, as well as its ability to support the Canadian economy, depends on the ability of financial institutions to absorb and manage major shocks. This is especially true for large banks, which perform services essential to the Canadian economy.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Financial institutions, Financial stability JEL Code(s): C, C6, C63, E, E2, E27, E3, E37, E4, E44, G, G0, G01, G2, G21