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We perform an analysis to determine how well the introduction of a countercyclical loanto- value (LTV) ratio can reduce household indebtedness and housing price fluctuations compared with a monetary policy rule augmented with house price inflation.

There have been positive developments in the global financial system since the June Financial System Review, in part reflecting some encouraging signs about the global economy. At the same time, significant vulnerabilities remain. The Governing Council judges that the overall risk to the stability of Canada’s financial system has decreased from “high” to “elevated” over the past six months.

This newsletter features the latest research publications by Bank of Canada economists including external publications and working papers published on the Bank of Canada’s website.

The financial system makes an important contribution to the welfare of all Canadians. The ability of households and firms to confidently hold and transfer financial assets is one of the fundamental building blocks of the Canadian economy.

This newsletter features the latest research publications by Bank of Canada economists including external publications and working papers published on the Bank of Canada’s website.

This issue features a summary of the Bank’s annual conference, which this year dealt with financial globalization, and three articles that present research by Bank staff on Canada’s mortgage market, the role of adverse selection in financial crises, and payment networks.

Get quarterly data for the indicators we use to track the evolution of the financial stability of the Canadian economy.

In this issue of the Financial System Review, the Bank of Canada’s Governing Council judges that, although the Canadian finan­cial system is currently on a sound footing, risks to its stability remain elevated and have edged higher since December 2010.

In this issue of the Financial System Review, the Governing Council judges that the risks to the stability of Canada’s financial system remain high, as in December. The sources of the key risks are broadly the same as those highlighted at that time and emanate primarily from the external environment.

Errata: The colour labels for Chart 11 in the June 2012 issue and for Chart 12 in the December 2011 isssue were defined incorrectly. See revised charts.

The financial system makes an important contribution to the welfare of all Canadians. The ability of households and firms to confidently hold and transfer financial assets is one of the fundamental building blocks of the Canadian economy.