G2 - Financial Institutions and Services
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Vulnerabilities in Defined-Benefit Pension Plans
An effective pension system enhances economic and financial efficiency. A majority of pension plans in Canada are defined-benefit (DB) plans, but DB plans are under stress from increasing longevity, low long-term interest rates, and the shrinking equity premium. DB plans are vulnerable to such shocks because they are complex financial vehicles, with interdependencies not fully […] -
Modelling Payments Systems: A Review of the Literature
Payments systems play a fundamental role in an economy by providing the mechanisms through which payments arising from transactions can be settled. The existing literature on the economics of payments systems is large but loosely organized, in that each model uses a distinct set-up and sometimes a distinct equilibrium concept. -
Best Instruments for Market Discipline in Banking
The author develops a dynamic model of banking competition to determine which capital instrument is most effective in disciplining banks' risk choice. Comparisons are conducted between equity, subordinated debentures (SD), and uninsured deposits (UD) as funding sources. -
Stress Testing the Corporate Loans Portfolio of the Canadian Banking Sector
Stress testing, at its most general level, is an investigation of the performance of an entity under abnormal operating conditions. -
Credit in a Tiered Payments System
Payments systems are typically characterized by some degree of tiering, with upstream firms (clearing agents) providing settlement accounts to downstream institutions that wish to clear and settle payments indirectly in these systems (indirect clearers). -
Are Canadian Banks Efficient? A Canada–U.S. Comparison
The authors compare the efficiency of Canada's largest banks with U.S. commercial banks over the past 20 years. Efficiency is measured in three ways. -
Estimation of the Default Risk of Publicly Traded Canadian Companies
Two models of default risk are prominent in the financial literature: Merton's structural model and Altman's non-structural model. -
Examining the Trade-Off between Settlement Delay and Intraday Liquidity in Canada's LVTS: A Simulation Approach
The author explores a fundamental trade-off that occurs between settlement delay and intraday liquidity in the daily operation of large-value payment systems (LVPS), with specific application to Canada's Large Value Transfer System (LVTS). -
Ownership Concentration and Competition in Banking Markets
Many countries prohibit large shareholdings in their domestic banks.The authors examine whether such a restriction restrains competition in a duopolistic loan market. Blockholders may influence managers' output decisions by choosing capital structure, as in Brander and Lewis (1986).