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Establishing a Resolution Regime for Canada’s Financial Market Infrastructures
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.Financial System Review - June 2018
This issue of the Financial System Review reflects the Bank’s judgment that high household indebtedness and housing market imbalances remain the most important vulnerabilities. While these vulnerabilities remain elevated, policy measures continue to improve the resilience of the financial system. A third vulnerability highlighted in the FSR concerns cyber threats to an interconnected financial system.
Shoring Up the Foundations for a More Resilient Banking System: The Development of Basel III
The authors trace the development of the Basel III standards for banking regulation. Basel III builds on two earlier frameworks, in response to weaknesses revealed during the global financial crisis. They highlight how implementation of the standards will underpin greater financial stability and provide a sound foundation for economic growth.Analysis of Household Vulnerabilities Using Loan-Level Mortgage Data
This report examines detailed data on home mortgages to provide a better understanding of the vulnerabilities associated with the mortgage market. The proportion of low-ratio mortgages is growing, particularly in regions with strong house price growth. Moreover, these borrowers exhibit less flexibility to adverse shocks, since they have high debt levels relative to income and have taken mortgages with long amortization periods.Financial System Review - November 2017
Canada’s International Investment Position: Benefits and Potential Vulnerabilities
While greater global financial integration is beneficial, the authors discuss how foreign capital inflows can also facilitate the buildup of domestic vulnerabilities and potentially lead to destabilizing reversals. Canada’s current international investment position is typical of advanced economies and will likely continue to act as an economic stabilizer. However, the growth and composition of Canada’s international investment position warrant continued monitoring.Using Market-Based Indicators to Assess Banking System Resilience
This report reviews the use of quantitative tools to gauge market participants’ assessment of banking system resilience. These measures complement traditional balance-sheet metrics and suggest that markets consider large Canadian banks to be better placed to weather adverse shocks than banks in other advanced economies. Compared with regulatory capital ratios, however, the measures suggest less improvement in banking system resilience since the pre-crisis period.Financial System Review - June 2017
Project Jasper: Are Distributed Wholesale Payment Systems Feasible Yet?
This report describes a joint endeavour between public and private sectors to explore a wholesale payment system based on distributed ledger technology (DLT). They find that a stand-alone DLT system is unlikely to be as beneficial as a centralized payment system in terms of core operating costs; however, it could increase financial system efficiency as a result of integration with the broader financial market infrastructure.