Financial System Hub
Promoting a stable and efficient financial system
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Indicators of financial vulnerabilities
Get quarterly data for the indicators we use to track the evolution of two vulnerabilities in the Canadian economy: the elevated level of household indebtedness and high house prices.
Updated: March 10, 2023
Potential benefits and key risks of fiat-referenced cryptoassets
Cryptoassets that reference a national currency (commonly known as stablecoins) aim to peg their value to the reference currency and typically use a reserve of traditional financial assets to maintain the peg. The market value of these fiat-referenced cryptoassets has grown more than thirtyfold between early 2020 and mid-2022. We explore some of their potential benefits and key risks.
Hugh Ding
Natasha Khan
Bena Lands
Cameron MacDonald
Laura Zhao
Content Types:
Staff analytical notes,
Staff research
December 19, 2022
Monitoring the health of Canada’s financial system
Senior Deputy Governor Carolyn Rogers discusses risks and vulnerabilities in our financial system and what the Bank of Canada is doing to support financial stability.Variable-rate mortgages with fixed payments: Examining trigger rates
We estimate the share of variable-rate mortgages with fixed payments that reached the so-called trigger rate—the interest rate at which mortgage payments no longer cover the principal. Amid rising interest rates, this share was close to 50% at the end of October 2022 and could potentially reach 65% in 2023.
Stephen Murchison
Maria teNyenhuis
Content Types:
Staff analytical notes,
Staff research
November 22, 2022
Five things we learned about Canadian Bitcoin owners in 2021
We present key findings from the 2021 Bitcoin Omnibus Survey on Canadians’ awareness and ownership of Bitcoin. Most Canadians have heard of Bitcoin, which remains primarily used as an investment. Ownership jumped in 2021, reflecting increased savings during the pandemic and greater availability of user-friendly platforms to buy Bitcoin.
Daniela Balutel
Walter Engert
Christopher Henry
Kim Huynh
Marcel Voia
Content Types:
Financial System Hub articles,
Publications
October 12, 2022
How does the Bank of Canada’s balance sheet impact the banking system?
We examine how changes in the Bank of Canada’s balance sheet impact the banking system. Quantitative easing contributed to an increase in the size of the banking system’s balance sheet and an improvement in bank liquidity coverage ratios. Quantitative tightening is expected to partially reverse these impacts. The banking system will have to adjust its liquidity management strategy in response.
Daniel Bolduc
Brad Howell
Grahame Johnson
Content Types:
Staff analytical notes,
Staff research
September 22, 2022
Fixed-income dealing and central bank interventions
We summarize the theoretical model of central bank asset purchases developed in Cimon and Walton (2022). The model helps us understand how asset purchases ease pressures on investment dealers to restore market conditions in a crisis.
Potential netting benefits from expanded central clearing in Canada’s fixed-income market
We assess whether more central clearing would enhance the resilience of Canadian fixed-income markets. Our analysis estimates the potential benefits of balance sheet netting under scenarios where central clearing is expanded to new participants.
Jessie Ziqing Chen
Johannes Chen
Shamarthi Ghosh
Manu Pandey
Adrian Walton
Content Types:
Staff analytical notes,
Staff research
June 22, 2022
Analyzing the house price boom in the suburbs of Canada’s major cities during the pandemic
We assess how location affects house prices in Canada. The gap in prices between suburbs and downtown was closing gradually before the pandemic. The gap has been closing faster since spring 2020. This finding reflects a shift in preferences toward more living space.
Financial System Review—2022
The Canadian financial system remains resilient, but vulnerabilities have become more complex and risks have grown. The Bank is carefully watching households’ high levels of mortgage debt, as well as the risks associated with a price correction in Canada’s housing market.
Tiff Macklem
Carolyn Rogers
Timothy Lane
Lawrence L. Schembri
Paul Beaudry
Toni Gravelle
Sharon Kozicki
Content Types:
Financial System Review,
Publications
June 9, 2022
Financial System Survey highlights—Spring 2022
This article presents the key results from the spring 2022 Bank of Canada Financial System Survey, conducted between February 22 and March 18. The survey included a special section on the potential risks associated with the global normalization of monetary policy.Content Types:
Financial System Survey,
Publications
June 6, 2022
How well can large banks in Canada withstand a severe economic downturn?
We examine the potential impacts of a severe economic shock on the resilience of major banks in Canada. We find these banks would suffer significant financial losses but nevertheless remain resilient. This underscores the role well-capitalized banks and sound underwriting practices play in supporting economic activity in a downturn.
Andisheh (Andy) Danaee
Harsimran Grewal
Brad Howell
Guillaume Ouellet Leblanc
Xuezhi Liu
Mayur Patel
Xiangjin Shen
Content Types:
Staff analytical notes,
Staff research
May 24, 2022
Assessing climate change risks to our financial system
Ensuring the stability and efficiency of the financial system is a key part of our work at the Bank of Canada. This includes analyzing structural changes that affect the economy—like climate change. These changes could increase vulnerabilities to the financial system.Content Types:
Financial System Hub articles,
Publications
January 14, 2022
Housing demand in Canada: A novel approach to classifying mortgaged homebuyers
We introduce a novel approach to categorize mortgaged homebuyers into first-time homebuyers, repeat homebuyers and investors. We show how these groups contribute to activity in Canadian housing markets, and we analyze the differences in their demographic and financial characteristics.Financial stability through the pandemic and beyond
Deputy Governor Paul Beaudry provides an update on financial vulnerabilities and risks in Canada, including those stemming from the COVID-19 pandemic.Financial System Survey highlights—Autumn 2021
This article presents the key results from the autumn 2021 Bank of Canada Financial System Survey, conducted between September 7 and September 24, 2021. The survey included a special section on the implications of low interest rates on strategies and risks.Content Types:
Financial System Survey,
Publications
November 22, 2021
Monitoring payment deferrals during the COVID-19 pandemic—update, July 2021
In the initial stages of the COVID-19 pandemic, Canada’s financial institutions allowed households to defer payments on a range of loans. With nearly all of these deferrals having expired, we provide a final update of how these loans have performed through to July 2021.Can the characteristics of new mortgages predict borrowers’ financial stress? Insights from the 2014 oil price decline
We study the relationship between characteristics of new mortgages and borrowers’ financial stress in Canada’s energy-intensive regions following the 2014 collapse in oil prices. We find that borrowers with limited home equity were more likely to have difficulty repaying debt.
Olga Bilyk
Ken Chow
Yang Xu
Content Types:
Staff analytical notes,
Staff research
September 22, 2021
Reaching for yield or resiliency? Explaining the shift in Canadian pension plan portfolios
“Reach for yield”—This is the commonly heard explanation for why pension plans shift their portfolios toward alternative assets. But we show that the new portfolios also hold more bonds, offer lower average returns and produce smaller and less volatile solvency deficits. These shifts are part of a broader strategy to reduce solvency risk.
Sébastien Betermier
Nicholas Byrne
Jean-Sébastien Fontaine
Hayden Ford
Jason Ho
Chelsea Mitchell
Content Types:
Staff analytical notes,
Staff research
August 25, 2021
Household financial vulnerabilities and physical climate risks
Natural disasters occur more often than before, potentially exposing households to financial distress. We study the intersection between household financial vulnerabilities and severe weather events.
Thibaut Duprey
Colin Jones
Callie Symmers
Geneviève Vallée
Content Types:
Staff analytical notes,
Staff research
August 23, 2021
Can regulating bank capital help prevent and mitigate financial downturns?
Countercyclical capital buffers are regulatory measures developed in response to the global financial crisis of 2008–09. This note focuses on how time-varying capital buffers can improve financial stability in Canada
Monitoring payment deferrals during the COVID-19 pandemic—update, March 2021
In the initial stages of the COVID-19 pandemic, Canada’s financial institutions allowed households to defer payments on a range of loans. With most of these deferrals having expired, we present updated details of how these loans have performed through to March 2021.Financial System Review Summary—2021
The Canadian financial system proved resilient during the COVID-19 pandemic—thanks to strong risk management and unprecedented fiscal and monetary policy support.
Tiff Macklem
Timothy Lane
Lawrence L. Schembri
Paul Beaudry
Toni Gravelle
Content Types:
Financial System Review,
Publications
May 20, 2021
Detecting exuberance in house prices across Canadian cities
We introduce a model to detect periods of extrapolative house price expectations across Canadian cities. The House Price Exuberance Indicator can be updated on a quarterly basis to support the Bank of Canada’s broader assessment of housing market imbalances.
Ugochi Emenogu
Cars Hommes
Mikael Khan
Content Types:
Staff analytical notes,
Staff research
May 20, 2021
Financial System Survey highlights—Spring 2021
This article presents the key results from the spring 2021 Bank of Canada Financial System Survey, conducted from February 22 to March 12, 2021. The survey included a special section on commercial real estate.Content Types:
Financial System Survey,
Publications
May 17, 2021
COVID-19’s impact on the financial health of Canadian businesses: An initial assessment
Despite COVID-19 challenges, bold policy measures in Canada have helped businesses manage cash flow pressures and kept insolvency filings low. But the impact of the pandemic has been uneven, and the financial health of some firms may further deteriorate over the next year.
Timothy Grieder
Mikael Khan
Juan Ortega
Callie Symmers
Content Types:
Staff analytical notes,
Staff research
May 10, 2021
Update on housing market imbalances and household indebtedness
Exceptional strength in the housing market during the pandemic is underpinning Canada’s economic recovery. However, two key vulnerabilities—housing market imbalances and elevated household indebtedness—have intensified.
Mikael Khan
Olga Bilyk
Matthew Ackman
Content Types:
Staff analytical notes,
Staff research
April 9, 2021
Non-bank financial intermediation in Canada: a pulse check
The Canadian non-bank financial intermediation (NBFI) sector saw strong growth in 2018 and 2019. In 2020, COVID‑19 caused a financial shock. We provide a preliminary analysis on the impact of COVID‑19 on the sector as well as an update on its growth.
Rohan Arora
Guillaume Bédard-Pagé
Philippe Besnier
Hayden Ford
Alan Walsh
Content Types:
Staff analytical notes,
Staff research
March 23, 2021
Monitoring payment deferrals during the COVID-19 pandemic—update, December 2020
During the COVID-19 pandemic, Canada’s financial institutions have allowed households to defer payments on a range of loans. We present updated details of debt payment deferrals by borrowers through to December 2020.Taking the pulse of Canada’s financial system
Deputy Governor Toni Gravelle discusses how the Bank of Canada is carefully monitoring our financial system as the economy recovers from the COVID‑19 pandemic.Monitoring payment deferrals during the COVID-19 pandemic
Since the start of the COVID-19 pandemic, Canada’s financial institutions have allowed borrowers to defer payments on a range of loans. In a series of charts, we investigate what payment deferrals tell us about the financial health of borrowers and the related risks to financial stability.Financial System Survey highlights—November 2020
This article presents the key results from the autumn 2020 Bank of Canada Financial System Survey, conducted from September 8 to September 25, 2020. The survey included a special section on the impact of and the responses to COVID-19.Content Types:
Financial System Survey,
Publications
November 20, 2020
Announcing the Bankers’ Acceptance Purchase Facility: a COVID‑19 event study
The Bank of Canada launched the Bankers’ Acceptance Purchase Facility (BAPF) to ensure that the bankers’ acceptance (BA) market could continue to function well during the financial crisis induced by the COVID‑19 pandemic. We review the impact that the announcement of this facility had on BA yields in the secondary market. We find that BA yield spreads declined by 15 basis points on the day of the announcement and by up to 70 basis points over a longer period. Using an econometric framework, we quantify the effect of the announcement and confirm early assertions presented in the Bank’s 2020 Financial System Review.
Rohan Arora
Sermin Gungor
Kaetlynd McRae
Jonathan Witmer
Content Types:
Staff analytical notes,
Staff research
October 19, 2020
What COVID-19 revealed about the resilience of bond funds
The liquidity management strategies of fund managers, supported by policy measures, have helped bond funds limit the increase in redemptions caused by COVID 19. This avoided further deterioration in liquidity in bond markets. Nevertheless, these funds were left with lower cash buffers, which could make them more vulnerable to additional large redemptions.
Guillaume Ouellet Leblanc
Ryan Shotlander
Content Types:
Staff analytical notes,
Staff research
August 6, 2020
COVID-19 and bond market liquidity: alert, isolation and recovery
The disruption due to COVID-19 reverberated through the bond markets in three phases. In the first phase, dealers met the rising demand for liquidity. In the second, dealers reduced the supply of liquidity, and trading conditions worsened significantly. Finally, the market returned to relative stability following several interventions by the Bank of Canada.
Jean-Sébastien Fontaine
Hayden Ford
Adrian Walton
Content Types:
Staff analytical notes,
Staff research
July 3, 2020
Bank of Canada contributes to new publications by the Network for Greening the Financial System
As a member of the Central Banks and Supervisors Network for Greening the Financial System (NGFS), the Bank of Canada contributed to three publications that aim to improve global understanding of the impact of climate change on the financial system and world economy.Content Types:
Financial System Hub articles,
Publications
June 24, 2020
Household indebtedness risks in the wake of COVID‑19
COVID-19 presents challenges for indebted households. We assess these by drawing parallels between pandemics and natural disasters. Taking into account the financial health of the household sector when the pandemic began, we run model simulations to illustrate how payment deferrals and the labour market recovery will affect mortgage defaults.
Olga Bilyk
Anson T. Y. Ho
Mikael Khan
Geneviève Vallée
Content Types:
Staff analytical notes,
Staff research
June 5, 2020
Scenario Analysis and the Economic and Financial Risks from Climate Change
This paper adapts climate-economy models that have been applied in other contexts for use in climate-related scenario analysis. We consider illustrative scenarios for the global economy that could generate economic and financial risks. Our results suggest there are significant economic risks from climate change and the move to a low-carbon economy.
Financial System Review Summary—2020
This issue of the Financial System Review focuses on the impact of COVID 19. The pandemic presents an unprecedented shock to the Canadian economy. This report identifies the effects on the Canadian financial system and explains how recent actions by the Bank and other policy-makers are helping to manage them. It further describes how a resilient financial system can help households and businesses smooth the effects of the COVID-19 shock and prepare for a robust recovery.
Stephen S. Poloz
Carolyn A. Wilkins
Timothy Lane
Lawrence L. Schembri
Paul Beaudry
Toni Gravelle
Content Types:
Financial System Review,
Publications
May 14, 2020
COVID-19: Actions to Support the Economy and Financial System
Learn about the economic impact of the COVID-19 pandemic and the Bank’s actions to support the Canadian economy and financial system.Content Types:
Financial System Hub articles,
Publications
March 24, 2020
Exploring new ways to pay
Deputy Governor Timothy Lane explains how the Bank of Canada is preparing for a future where Canadians may need a digital currency issued by their central bank.The Cyber Incident Landscape
The Canadian financial system is vulnerable to cyber threats. But for many firms, cyber risk is difficult to quantify. We examine public information on past cyber incidents to better understand the current risk landscape and find that a holistic view is needed to fully grasp the nature of this risk.
Financial stability in an uncertain world
Senior Deputy Governor Carolyn A. Wilkins talks about the recent strengthening of Canada’s financial system.
Carolyn A. Wilkins
Climate change Is a big issue for central banks
Climate change is transforming the economy and financial systemFinancial System Survey Highlights—November 2019
This article presents the key results from the autumn 2019 Bank of Canada Financial System Survey, conducted September 24 and October 11, 2019. This survey included special questions on climate change risk.Content Types:
Financial System Survey,
Publications
November 18, 2019
Home Equity Extraction and Household Spending in Canada
We use rich microdata to measure home equity extraction in Canada and track its evolution over time. We find home equity extraction has been rising in recent years and has likely contributed materially to dynamics in household spending.
Anson T. Y. Ho
Mikael Khan
Monica Mow
Brian Peterson
Content Types:
Staff analytical notes,
Staff research
September 20, 2019
A Resolution Regime for Financial Market Infrastructures
Canada’s most important payment clearing and settlement systems now have a resolution regime. As resolution authority, the Bank of Canada has new powers to protect the stability of the Canadian financial system in the unlikely event an FMI fails.Content Types:
Financial System Hub articles,
Publications
July 11, 2019
Launch of the Canadian Financial Sector Resiliency Group
This new public-private partnership led by the Bank of Canada focuses on the operational resilience of Canada’s critical financial infrastructure. The group will coordinate responses to major operational incidents, including cyber attacks, and plan initiatives to promote resilience.Content Types:
Press,
Press releases
June 27, 2019
IMF Financial System Stability Assessment for Canada
The International Monetary Fund’s comprehensive analysis of the Canadian financial system increases awareness and encourages discussion and debate. The IMF consulted with the Bank of Canada and other Canadian authorities, but the report is an independent assessment and does not represent the views of the Bank.Content Types:
Financial System Hub articles,
Publications
July 11, 2019
Financial System Review Summary—2019
In our Financial System Review, we identify the main vulnerabilities and risks to financial stability in Canada and explain how they have evolved over the past year. This issue reflects the Bank’s judgment that the vulnerabilities associated with high household debt and imbalances in the housing market have declined modestly but remain significant. The Financial System Review is a product of the Governing Council of the Bank of Canada: Stephen S. Poloz, Carolyn A. Wilkins, Timothy Lane, Lawrence Schembri, Lynn Patterson and Paul Beaudry.
Stephen S. Poloz
Carolyn A. Wilkins
Timothy Lane
Lawrence L. Schembri
Lynn Patterson
Paul Beaudry
Content Types:
Financial System Review,
Publications
May 16, 2019
Assessing the Resilience of the Canadian Banking System
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.
Charles Gaa
Xuezhi Liu
Cameron MacDonald
Xiangjin Shen
Content Types:
Staff analytical notes,
Staff research
May 16, 2019
Financial System Survey Highlights—May 2019
This article presents the key results from the spring 2019 Bank of Canada Financial System Survey, conducted March 11 and March 29, 2019. This survey included a special question on cyber risk.Content Types:
Financial System Survey,
Publications
May 7, 2019
Could Canadian Bond Funds Add Stress to the Financial System?
We create a hypothetical scenario to study the role bond funds play in intensifying shocks to the financial system. Using data from 2018 and 2007, we find that bond funds play a larger role now than they did in the past.
Rohan Arora
Guillaume Bédard-Pagé
Guillaume Ouellet Leblanc
Ryan Shotlander
Content Types:
Staff analytical notes,
Staff research
April 15, 2019
Non-Bank Financial Intermediation in Canada: An Update
Non-bank financial intermediation provides a valuable alternative to traditional banking. We provide an update on the Bank’s monitoring of this area, including insights obtained from new data sources.A Perspective on Crypto “Money”
From a central banking perspective, the monetary landscape 10 to 15 years from now could look radically different than it does today. This paper explores some important research and policy questions for a central bank regarding cryptoassets.
James Chapman
Carolyn A. Wilkins
Content Types:
Staff discussion papers,
Staff research
February 6, 2019
Price Caps in Canadian Bond Borrowing Markets
Price controls, or caps, can lead to shortages, as 1970’s gasoline price controls illustrate. One million trades show that the market for borrowing bonds in Canada has an implicit price cap: traders are willing to pay no more than the overnight interest rate to borrow a bond. This suggests the probability of a shortage increases when interest rates are very low.
Léanne Berger-Soucy
Jean-Sébastien Fontaine
Adrian Walton
Content Types:
Staff analytical notes,
Staff research
January 14, 2019
Governor Poloz speaks on financial vulnerabilities and risks to the economy
In his final speech of 2018, Governor Stephen S. Poloz discusses the vulnerabilities and risks in Canada’s financial system as well as Canadian and global economic developments. He explains how all this was taken into account in the December interest rate decision.The Impact of Recent Policy Changes on the Canadian Mortgage Market
Recent policy changes are having a clear impact on the mortgage market. The number of new, highly indebted borrowers has fallen, and overall mortgage activity has slowed significantly.Financial System Survey Highlights—November 2018
This article presents the key results from the autumn 2018 Bank of Canada Financial System Survey, conducted between September 24 and October 12, 2018. The survey collects expert opinions from financial system experts on the risks to, and resilience of, the Canadian financial system.Content Types:
Financial System Survey,
Publications
November 14, 2018
Financial System Resilience and House Price Corrections
We use models to better understand and assess how risks could affect the financial system. In our hypothetical scenario, a house price correction and elevated financial stress weigh on the economy. An increased number of households and businesses have difficulty repaying loans. Nonetheless, the large banks remain resilient.
Thibaut Duprey
Xuezhi Liu
Cameron MacDonald
Maarten van Oordt
Sofia Priazhkina
Xiangjin Shen
Joshua Slive
Virginie Traclet
Content Types:
Financial System Hub articles,
Publications
November 14, 2018
Keeping the financial system healthy
We are all better off if the financial system can weather a storm or two. And every one of us plays a role in keeping it that way.
Joshua Slive
Donald Coletti
Content Types:
Publications,
The Economy, Plain and Simple
October 16, 2018
Financial System Review: Assessment of Vulnerabilities and Risks—June 2018
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.Content Types:
Financial System Review,
Publications
June 7, 2018
Financial System Research Centre
The FSRC promotes financial system research in Canada to inform policy and improve the economic and financial well-being of Canadians.
November 14, 2018