In 2021, the Bank focused its international efforts on:
- the global macroeconomic policy response to the evolving impacts of the COVID‑19 pandemic
- global policies related to climate change and the digitalization of the economy
- the future of the international monetary and financial system
- promoting and reinforcing the resilience of the international financial system
Steering the global economic recovery
To support price stability and the global economic recovery from the pandemic, the Bank promoted the importance of striking the right balance of policies.
The Bank worked with its global counterparts,1 emphasizing the need to:
- monitor inflation dynamics closely
- look through pressures that were transitory
- act as needed to achieve their mandates
- communicate clearly about their policy stances
Collaborating to address shared global challenges
Policy-makers expressed renewed resolve to strengthen multilateral cooperation while tackling global challenges.
- Climate change: For the first time, both the G7 and the G20 presidencies included climate action among their top global policy priorities. The Bank’s work on climate transition scenarios illustrates the importance of transition financing for all sectors to achieve a smooth shift to a low-carbon economy. The G20 agreed that more systematic analysis is needed to assess macroeconomic risks stemming from climate change.
- Digitalization: The rapid increase in digital activity during the pandemic highlighted the need for actions across countries that take advantage of the benefits of digitalization and ensure those benefits are broadly shared.
- The Bank leveraged staff research on automation to show how digitalization may also reduce jobs and displace workers, illustrating the need for policies to support those who lose their jobs.
- The Bank continued to chair the G7 Central Bank Digitalization Working Group. Members discussed:
- the likelihood that pandemic-related digital shifts in behaviour (such as widespread remote work) will persist
- how such shifts affect central banks’ estimates of productive capacity and the labour market
- G7 finance ministers and central bank governors discussed shared priorities for ongoing work promoting the cyber security and resilience of the financial sector—issues that are increasingly relevant in a more digital world.
- The G7 released a statement on shared principles for central bank digital currencies and digital payments.
Calling for action on the international monetary and financial system
In his first international speech, Governor Macklem called for global cooperation on one of the most enduring central bank challenges: the future of the international monetary and financial system.
The Governor urged the international community to ensure that managing immediate crises does not come at the expense of making longer-term adjustments that will raise productivity and standards of living. Improving prosperity in the long term requires steady progress toward liberalization and a commitment to sound macroeconomic and financial policy frameworks.
The Governor also noted that the system must evolve to be able to handle future changes, including the:
- exit from exceptional monetary policy
- transition to net-zero emissions
- potential digitalization of the international monetary system
This work will be critical in the aftermath of the pandemic.
Promoting financial system resilience
Following the global financial crisis of 2007–09, authorities addressed key vulnerabilities in the banking system by revamping the global regulatory framework. The Basel III standards are the most recent reforms aimed at improving the resilience of banks around the world to financial stress.2
In 2021, the task force published a report assessing how the Basel III reforms contributed to reducing the stress the pandemic placed on the global banking sector.3 The Bank also collaborated on publishing the final report evaluating the too-big-to-fail reforms endorsed by the G20 after the global financial crisis.4
Governor Macklem is an active member of the Standing Committee on Assessment of Vulnerabilities of the Financial Stability Board (FSB). This committee monitors and assesses vulnerabilities affecting the global financial system. In 2021, it published a new surveillance framework for identifying global financial vulnerabilities.5
The market turmoil in March 2020 highlighted the need to strengthen the resilience of non-bank financial intermediation (NBFI). Doing so would ensure a more stable flow of financing to the economy and reduce the need for central banks to undertake extraordinary interventions. In 2021, the Bank was actively involved in many elements of the ambitious FSB work program on NBFI.6
Strengthening the payments ecosystem
The Bank helped develop the international roadmap for enhancing cross-border payments, and in 2021 it continued to play an active role in the roadmap’s implementation. The aim of this global effort is to make cross-border payments cheaper, faster, more inclusive and more transparent.
The Bank also worked with international partners to promote the soundness of global stablecoins. It chairs the FSB working group on regulatory issues of stablecoins, which makes recommendations on their regulation, supervision and oversight. In 2021, the Bank contributed to an assessment of the progress made against recommendations drafted in 2020 and to a consultative report on the application of the CPMI-IOSCO Principles for Financial Market Infrastructures to global stablecoins.7, 8
We are collaborating with international partners to address the pain points in cross-border payments, and we’re fully committed to working with the public and private sectors to make any necessary changes in Canada to support this.May 31, 2021
In 2022, the Bank will continue to:
- prioritize the highest-value international activities that leverage our Canadian advantage
- further integrate research into our global policy work
- explore the potential to build coalitions with a diverse set of partners to enhance Canada’s global influence
- advocate for greater investment in strengthening the international monetary and financial system to handle or facilitate future transitions
- lead international efforts to evaluate the effectiveness of Basel III reforms for banking sector resilience
- support the implementation of the FSB roadmap for cross-border payments
- 1. Italian G20 Presidency, Fourth G20 Finance Ministers and Central Bank Governors meeting (Communiqué, October 13, 2021).[←]
- 2. T. Gomes, S. King and A. Lai, “Shoring Up the Foundations for a More Resilient Banking System: The Development of Basel III,” Bank of Canada Financial System Review (November 2017): 35–42.[←]
- 3. Basel Committee on Banking Supervision, Early Lessons from the COVID‑19 Pandemic on the Basel Reforms (Bank for International Settlements, July 2021).[←]
- 4. Financial Stability Board, Evaluation of the Effects of Too-Big-to-Fail Reforms: Final Report (March 2021).[←]
- 5. Financial Stability Board, FSB Financial Stability Surveillance Framework (September 2021).[←]
- 6. Financial Stability Board, Enhancing the Resilience of Non-Bank Financial Intermediation: Progress Report (November 2021).[←]
- 7. Financial Stability Board, Regulation, Supervision and Oversight of “Global Stablecoin” Arrangements: Progress Report on the Implementation of the FSB High-Level Recommendations (October 2021).[←]
- 8. Committee on Payments and Market Infrastructures and Board of the International Organization of Securities Commissions (CPMI-IOSCO), Application of the Principles for Financial Market Infrastructures to Stablecoin Arrangements (Bank for International Settlements and International Organization of Securities Commissions, October 2021).[←]