Stéphane Lavoie was appointed Managing Director, Financial Markets Department (FMD), effective November 1, 2021. He is responsible for policy formulation and execution of the Bank of Canada’s financial market activities as they relate to monetary policy implementation, funds management and financial system liquidity. He also oversees analysis and research and directs policy advice related to domestic and international financial markets.
Mr. Lavoie has a wealth of experience in financial market analysis and operations, including collateral and liquidity policies, as well as in monetary policy, the financial system and funds management. Since joining the Bank in 2001, he has held several senior positions. He was appointed Senior Director of the Bank’s Calgary Operational Site (COS) for market and banking operations in July 2018. Before that, he served as Deputy Managing Director of the Funds Management and Banking Department (FBD) and of FMD. He has been a co-chair of the Foreign Reserves Committee, the Debt and Treasury Management Committee and the Retail Debt Committee. He has also served as a member of the Bank’s Pension Fund Investment Committee and represented the Bank on various international committees.
Mr. Lavoie obtained both a bachelor and master’s degrees in business administration with a concentration in finance from Université Laval and holds the Chartered Financial Analyst designation.
The recent crisis was characterized by widespread deterioration in funding conditions, as well as impairment of the mechanism through which liquidity is normally redistributed within the financial system. Central banks responded with extraordinary measures. This article examines the provision of liquidity by central banks during the crisis as they adapted their existing facilities and introduced new ones, while encouraging a return to private markets and mitigating moral hazard. A review of this experience illustrates the importance of clear principles for intervention, a flexible operating framework, and clear communication and co-operation by central banks. By exposing the degree of interdependence of financial institutions and markets, the crisis highlighted the need for reforms aimed at improving the infrastructure supporting core funding markets and the liquidity of individual institutions.
Using turnover ratios, Anderson and Lavoie describe the recent evolution of liquidity in various secondary government bond markets, focusing specifically on the market for Government of Canada securities. They attribute much of the recent variation in liquidity to such cyclical factors as changes in the interest rate environment and investors' appetite for risk, as well as developments in equity markets in the late 1990s. They also examine longer-term structural and policy-related trends, including the rate of adoption of financial and technological innovations and the level of government borrowing and debt-management initiatives.