Financial Stability Report

Residential mortgage securitization plays an important role in the Canadian system of housing finance, especially given the rising share of government-supported (i.e., public) securitization over the past 15 years. Mordel and Stephens analyze the evolution of two types of mortgage securitization in Canada— private and public — focusing in particular on the underlying public policy and economic benefits of the latter. They review the potential implications of the extent of public securitization and conclude with a discussion of policies that could be considered to reinvigorate private securitization in Canada.

The Reports section of the Financial System Review examines selected issues of relevance to the Canadian and global financial systems. The December 2015 issue features two reports on significant developments in the financial system related to household finances: the importance of residential mortgage securitization for Canadian housing finance and the changing patterns of indebtedness of Canadian households.

The authors present the four common cyclical vulnerabilities that appear in financial systems, providing examples of qualitative and quantitative indicators used to monitor these vulnerabilities across different sectors. They also discuss other inputs to the vulnerability assessment and to the internal process used at the Bank of Canada for identifying, evaluating and communicating vulnerabilities and risks, and highlight some of the key challenges in assessing financial system vulnerabilities and risks.

The authors examine the liquidity and leverage characteristics of Canadian long-term, open-end mutual funds in terms of their potential systemic effects on the Canadian mutual fund sector and on the Canadian financial system more broadly. In their overall assessment of this sector, they consider the regulation, market size and ownership structure of mutual funds in Canada and provide observations about the industry globally.

The Reports section of the Financial System Review examines selected issues of relevance to the Canadian and global financial systems. The June 2015 issue features two reports summarizing recent work by Bank of Canada staff on specific financial sector policies.