This note presents a composite indicator of Canadian financial system vulnerabilities—the Vulnerabilities Barometer. It aims to complement the Bank of Canada’s vulnerabilities assessment by adding a quantitative and synthesized perspective to the more granular (distributional) analysis presented in the Financial System Review.
Staff Analytical Notes
Staff Discussion Papers
The author uses a quantitative network analysis approach to assess how participants in the Large Value Transfer System (LVTS) respond to partial outages at other banks.
Analysis of the characteristics and structure of a network of financial institutions can provide insight into the complex relationships and interdependencies that exist in a payment, clearing, and settlement system (PCSS), and allow an intuitive understanding of the PCSS's efficiency, stability, and resiliency.
Staff Working Papers
Stock market fundamentals would not seem to meaningfully predict returns over a shorter-term horizon—instead, I shift focus to severe downside risk (i.e., crashes).
This paper combines loan-level administrative data with household-level survey data to analyze the impact of recent macroprudential policy changes in Canada using a microsimulation model of mortgage demand of first-time homebuyers.
Household debt can be an important source of vulnerability to the financial system. This technical report describes the Household Risk Assessment Model (HRAM) that has been developed at the Bank of Canada to stress test household balance sheets at the individual level.
Bank of Canada Review articles
November 14, 2013 This article focuses on a quantitative method to identify financial system vulnerabilities, specifically, an imbalance indicator model (IIM) and its application to Canada. An IIM identifies potential vulnerabilities in a financial system by comparing current economic and financial data with data from periods leading up to past episodes of financial stress. It complements other sources of information - including market intelligence and regular monitoring of the economy - that policy-makers use to assess vulnerabilities.
February 17, 2011 In this article, the authors review work done at the Bank of Canada and at other central banks with the relatively new application of network analysis to the study of payments systems.
Financial System Review articles
December 15, 2015
Indebted Households and Potential Vulnerabilities for the Canadian Financial System: A Microdata AnalysisOver the past decade, an increasing proportion of households in Canada have become highly indebted relative to their income. These highly indebted households now hold one-fifth of total Canadian household debt.Simulations suggest that this greater degree of household indebtedness could exacerbate the impact of shocks to income and interest rates relative to the pre-crisis period. However, an assessment of the vulnerability of the Canadian financial system should, among other factors, account for the ability of Canadian financial institutions to withstand losses from the household sector.
- "The Impact of Macroprudential Housing Finance Tools in Canada"
(with Jason Allen, and Brian Peterson), Journal of Financial Intermediation (forthcoming).