G2 - Financial Institutions and Services

• May 14, 2015

  The “Bank” at the Bank of Canada

  Bank of Canada Review - Spring 2015 Thérèse Couture, Christian Bélisle

  In this article, we describe the various types of banking services (payments, settlement and safekeeping) that the Bank of Canada provides to different types of clients (the Government of Canada, financial market infrastructures, financial institutions, foreign central banks and the Canada Deposit Insurance Corporation). We also explain the reasons the Bank provides these services and how this role supports its core mandates, in particular financial stability. Finally, we explore the factors driving the growth and evolution in the provision of these banking services.

  Content Type(s): Publications, Bank of Canada Review articles JEL Code(s): E, E5, E50, G, G2, G20
• May 14, 2015

  The Use of Cash in Canada

  Bank of Canada Review - Spring 2015 Ben Fung, Kim Huynh, Gerald Stuber

  The Bank of Canada’s 2013 Methods-of-Payment Survey indicates that the share of cash in the overall number of retail transactions has continued to decrease, mainly because of increased use of contactless credit cards. The share of cash in the total value of retail transactions was virtually unchanged from 2009 to 2013. In particular, the value share of cash transactions above $50 increased. Automated banking machines (ABMs), still the major source of cash for Canadians, were used less often in 2013 than in 2009. Cash use in Canada is broadly similar to that in Australia and the United States.

  Content Type(s): Publications, Bank of Canada Review articles JEL Code(s): C, C8, C83, E, E4, E42, G, G2, G21, L, L8, L81
• December 10, 2014

  Exchange-Traded Funds: Evolution of Benefits, Vulnerabilities and Risks

  Financial System Review - December 2014 Ian Foucher, Kyle Gray

  Ian Foucher and Kyle Gray explain the different types of exchange-traded funds (ETFs), which present both benefits and risks for investors. They discuss ways in which the risk characteristics of certain ETF products could have broader implications for the financial system, and describe the evolution of ETF market structure and regulation in different jurisdictions as authorities try to mitigate risks related to ETFs.

  Content Type(s): Publications, Financial System Review articles JEL Code(s): G, G1, G14, G18, G2, G20
• December 10, 2014

  Cyber Security: Protecting the Resilience of Canada’s Financial System

  Financial System Review - December 2014 Harold Gallagher, Wade McMahon, Ron Morrow

  Harold Gallagher, Wade McMahon and Ron Morrow examine the various sources of cyber attacks and their potential for systemic risk. Against this background, the report highlights efforts being made to protect against cyber-security threats, including individual and collective actions by financial institutions and financial market infrastructures, as well as initiatives by international organizations, regulatory authorities and governments. The authors then describe the coordination, under the Joint Operational Resilience Management program, of private and public sector actions in Canada for managing and testing capabilities during severe operational events such as cyber attacks.

  Content Type(s): Publications, Financial System Review articles JEL Code(s): G, G2, G20, G23, G28
• November 4, 2014

  Housing Finance in Canada: Looking Back to Move Forward

  Lawrence L. Schembri

  The Canadian system of housing finance proved to be resilient and efficient during the global financial crisis and its aftermath. The system’s effectiveness is the result of a rigorous prudential regulatory and supervisory regime coupled with targeted government guarantees of mortgage insurance and securitization products.

  JEL Code(s): G21, R31, R38
• June 12, 2014

  Stress Testing the Canadian Banking System: A System-Wide Approach

  Financial System Review - June 2014 Kartik Anand, Guillaume Bédard-Pagé, Virginie Traclet

  Stress testing is an important tool used by financial authorities and entities around the world to evaluate potential risks to the financial system. Kartik Anand, Guillaume Bédard-Pagé and Virginie Traclet discuss different stress-testing approaches, with emphasis on the innovative and analytically rigorous model developed by the Bank of Canada: the MacroFinancial Risk Assessment Framework (MFRAF). They also present the stress-test results obtained in the context of the 2013 Canada Financial Sector Assessment Program led by the International Monetary Fund, including the important contributions made by the use of MFRAF in the exercise.

  Content Type(s): Publications, Financial System Review articles JEL Code(s): C, C6, C63, G, G0, G01, G2, G21
• June 12, 2014

  Making Banks Safer: Implementing Basel III

  Financial System Review - June 2014 Éric Chouinard, Graydon Paulin

  Éric Chouinard and Graydon Paulin review the progress to date in implementing Basel III, the new framework of global regulatory standards for the banking sector developed by the Basel Committee on Banking Supervision. The report highlights the expected net benefits of implementing Basel III, as well as the challenges in ensuring international consistency in measuring the risk-weighted capital of banks. It includes a discussion on how implementing Basel III has affected the banking system in Canada and other important jurisdictions, and demonstrates the need for ongoing assessment of the effects on the financial system and the macroeconomy.

  Content Type(s): Publications, Financial System Review articles JEL Code(s): G, G2, G28
• November 14, 2013

  Fragmentation in Canadian Equity Markets

  Bank of Canada Review - Autumn 2013 Corey Garriott, Anna Pomeranets, Joshua Slive, Thomas Thorn

  Changes in technology and regulation have resulted in an increasing number of trading venues in equity markets in Canada. New trading platforms have intensified price competition and have encouraged innovation, and they do not appear to have segmented trade. But the increasingly complex market structure has necessitated investments in expensive technology and has introduced new operational risks. Regulatory responses should be carefully adapted to retain the competition and innovation associated with this market fragmentation.

  Content Type(s): Publications, Bank of Canada Review articles JEL Code(s): G, G2, L, L1, L13, N, N2, N22
• February 21, 2013

  Conference Summary: Financial Intermediation and Vulnerabilities

  Bank of Canada Review - Winter 2012-2013 Jason Allen, James Chapman, Ian Christensen

  The Bank of Canada’s annual economic conference, held in October 2012, brought together experts from across Canada and around the world to discuss key issues concerning financial intermediation and vulnerabilities. The conference covered such topics as household finances and their relationship to financial stability, as well as bank regulation, securitization and shadow banking.

  Content Type(s): Publications, Bank of Canada Review articles JEL Code(s): G, G2
• November 15, 2012

  Access, Competition and Risk in Centrally Cleared Markets

  Bank of Canada Review - Autumn 2012 Jean-Sébastien Fontaine, Héctor Pérez Saiz, Joshua Slive

  Central counterparties can make over-the-counter markets more resilient and reduce systemic risk by mitigating and managing counterparty credit risk. These benefits are maximized when access to central counterparties is available to a wide range of market participants. In an over-the-counter market, there is an important trade-off between risk and competition. A model of an over-the-counter market shows how risk and competition could be influenced by the incentives of market participants as they move to central clearing. In a centrally cleared market, there may be less risk when participation is high. This helps to explain why regulators have put in place requirements for fair, open and risk-based access criteria.

  Content Type(s): Publications, Bank of Canada Review articles JEL Code(s): G, G1, G18, G2, G21, L, L1, L13