An international initiative to increase the use of central clearing for OTC derivatives emerged as one of the reactions to the 2008 financial crisis. The move to central clearing is a fundamental change in the structure of the market.
Staff working papers
Bank of Canada Review articles
June 18, 2005 Defined-benefit (DB) pension plans account for the majority of employer pension fund assets. In recent years, a number of DB plans have become underfunded, in sharp contrast to the 1990s, when many plans had large actuarial surpluses. The deterioration in the financial health of DB plans has underscored various longer-term structural issues that could make it increasingly difficult for plan sponsors to manage the financial risks of these plans. Tuer and Woodman examine how funding deficits, a greater focus on plan liabilities, a low yield environment, and changing investment beliefs are influencing investment decisions in the Canadian DB pension sector. They review the funding of DB plans, changing views on the equity-risk premium, and the shift towards liability-centred approaches to investment and how these developments are affecting pension sector investment. They also consider additional influences on the pension sector, including the limited supply of long-term bonds, the elimination of the foreign-property rule, and the movement towards fair-value accounting and a financial-economics approach to actuarial valuation, as well as their implications for financial markets.
Financial System Review articles
June 7, 2018 This report highlights how an effective resolution regime promotes financial stability. It does this by ensuring that financial market infrastructures (FMIs) would be able to continue to provide their critical functions during a period of stress when an FMI’s own recovery measures were failing. The report explains the Bank of Canada’s new role as the resolution authority for FMIs, which will further bolster financial system resilience.
December 20, 2010
December 14, 2009
- “Liquidity and central clearing: evidence from the credit default swap market,”
(with Jonathan Witmer and Joshua Slive), 2013, Journal of Financial Market Infrastructures, Volume 112, Issue 1, Pages 91-115, April 2014.