Repo markets are crucial for the functioning of government bond markets. They are also an important source of short-term funding. But their size and widespread use mean they can transmit financial stress if conditions deteriorate.
Canadian businesses remain in good financial shape overall, but risks are building. Trade uncertainty and geopolitical tensions could create new stress for some firms.
This article presents the key results from the 2026 Bank of Canada Financial System Survey, conducted between February 23 and March 13. The survey included a special section on the use and risks of artificial intelligence (AI).
The war in the Middle East has pushed up oil prices, putting pressure on inflation. In a situation where geopolitical tensions trigger a severe tightening in financial conditions, the resilience of the financial system could be tested.
Canada’s financial system has functioned well through a challenging year. Households and businesses remain in stable financial condition, and banks have strengthened their capacity to absorb shocks. However, vulnerabilities have increased in some parts of the system, and a more turbulent global environment poses risks to financial stability.
Canada’s financial system has functioned well through a challenging year. Households and businesses remain in stable financial condition, and banks have strengthened their capacity to absorb shocks. However, vulnerabilities have increased in some parts of the system, and a more turbulent global environment poses risks to financial stability.