A stable and efficient financial system is essential for sustained economic growth and rising living standards.
The Bank of Canada promotes the economic and financial welfare of Canada by fostering a stable and efficient financial system, which includes banks and credit unions, the financial markets, and clearing and settlement systems. The Bank does this by :
- providing central banking services, including liquidity and lender-of-last-resort facilities;
- overseeing critical financial market infrastructures;
- conducting and publishing analyses and research; and
- helping to develop and implement policy.
This issue of the Financial System Review reflects the Bank’s judgment that high household indebtedness and housing market imbalances remain the most important vulnerabilities. While these vulnerabilities remain elevated, policy measures continue to improve the resilience of the financial system. A third vulnerability highlighted in the FSR concerns cyber threats to an interconnected financial system.
Provision of Liquidity to the Financial System
The Bank of Canada is the ultimate source of liquid funds to the financial system, and serves as the system’s “lender of last resort". The deployment of its routine and emergency liquidity tools are guided by the Bank’s framework for market operations and liquidity provision.
Oversight of Financial Market Infrastructures
Under the authority of Canada’s Payment Clearing and Settlement Act, the Bank conducts regulatory oversight of designated financial market infrastructures (FMIs). These include systemically important payment systems and clearing and settlement systems. Oversight is conducted according to the Bank of Canada’s Risk-Management Standards for Designated FMIs.
Assessing Financial Stability
Bank staff conduct analysis and research to identify and mitigate systemic risks that might impair the functioning of the financial system. The results are published twice a year in the Financial System Review.
Financial System Committees
The Bank of Canada collaborates with federal, provincial and international authorities as well as industry to achieve its financial system goals.