G2 - Financial Institutions and Services
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Monetary Policy Transmission Through Shadow and Traditional Banks
I investigate how monetary policy transmits to mortgage rates via the mortgage market concentration channel for both traditional and shadow banks in the United States from 2009 to 2019. On average, shadow and traditional banks exhibit only a slight disparity in transmitting monetary shocks to mortgage rates. -
Decomposing Large Banks’ Systemic Trading Losses
Do banks realize simultaneous trading losses because they invest in the same assets, or because different assets are subject to the same macro shocks? This paper decomposes the comovements of bank trading losses into two orthogonal channels: portfolio overlap and common shocks. -
The Role of Long-Term Contracting in Business Lending
This paper examines inefficiencies arising from a lack of long-term contracting in small business lending in China. -
January 15, 2024
Mapping out the implications of climate transition risk for the financial system
We develop a new analytical framework to understand the system-wide implications of climate transition risk. When applying this framework to Canadian data, we find that interconnections within the financial sector could amplify the direct effects of climate transition risk on financial entities. -
January 15, 2024
Flood risk and residential lending
We present key findings of a recent study that evaluates the credit risk that flooding poses to the residential lending activities of Canadian banks and credit unions. Results show that such risk currently appears modest but could become larger with climate change. -
Procyclicality in Central Counterparty Margin Models: A Conceptual Tool Kit and the Key Parameters
Regulators need to provide effective procyclicality guidance, and central counterparties must design and calibrate their margin systems and procyclicality frameworks appropriately. To serve these needs, we provide a novel conceptual tool kit. Further, we highlight that the focus should be on the key margin system parameters in determining procyclicality. -
Climate-Related Flood Risk to Residential Lending Portfolios in Canada
We assess the potential financial risks of current and projected flooding caused by extreme weather events in Canada. We focus on the residential real estate secured lending (RESL) portfolios of Canadian financial institutions (FIs) because RESL portfolios are an important component of FIs’ balance sheets and because the assets used to secure such loans are immobile and susceptible to climate-related extreme weather events. -
Understanding the Systemic Implications of Climate Transition Risk: Applying a Framework Using Canadian Financial System Data
Our study aims to gain insight on financial stability and climate transition risk. We develop a methodological framework that captures the direct effects of a stressful climate transition shock as well as the indirect—or systemic—implications of these direct effects. We apply this framework using data from the Canadian financial system. -
The impact of higher interest rates on mortgage payments
We investigate how the increase in interest rates since early 2022 is affecting mortgage payments. By November 2023, less than half of mortgage holders had faced higher payments. Many borrowers will see a sizable increase in payments at renewal, although income growth could help mitigate the impact.