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Using the Bank for International Settlements (BIS) Locational Banking Statistics data on bilateral bank claims from 1995 to 2014, we analyze the impact of monetary policy on cross-border bank flows. We find that monetary policy in a source country is an important determinant of cross-border bank flows.

Over the past several years, the Bank for International Settlements has noted that Canada’s credit-to-GDP gap has widened and is above thresholds indicating future banking stress.

Over the last 30 years, the business mix of banks in Canada has changed significantly. Progress in information-processing technology, legislative changes, and market forces have combined to blur the traditional distinctions between banks and other financial institutions and have allowed banks to offer a much wider range of products and services. In this article, the author reviews the expansion of bank lending to households over this period and their recent movement into personal wealth management. While these trends were facilitated by revisions to legislation, they also reflected the changing needs of the "baby boom" generation, first as home-buyers and, more recently, as middle-aged investors. On the commercial and corporate side, banks reacted to the rapid expansion of securities markets (and to the reduced demand for intermediation by both lenders/depositors and borrowers) by moving into investment banking, after legislative changes opened this business to them in the late 1980s. They also used their expertise in credit assessment and risk management to provide credit guarantees and to act as counterparties and intermediaries in derivatives markets. Notable in this broadening of bank activities has been their more recent entry into the trust, mutual fund, and retail brokerage business. The banks have also made preliminary forays into insurance. The expansion of off-balance-sheet activities has made fee income an increasingly important part of bank earnings. The article also looks at the emerging tools and techniques that will most likely transform the structure of banking in the future.

In complex and interconnected banking systems, counterparty risk does not depend only on the risk of the immediate counterparty but also on the risk of others in the network of exposures.

We present a model in which banks and other financial intermediaries face both occasionally binding borrowing constraints and costs of equity issuance. Near the steady state, these intermediaries can raise equity finance at no cost through retained earnings.

From the end of 2008 to the middle of last year, Canada experienced a short, sharp recession. With the exception of government spending, all major components of aggregate demand declined, and industrial production dropped 15 per cent. Canadian exporters suffered particularly, owing to the sharp fall in the components of U.S. economic activity that matter most for Canada.

The use of bank notes in Canada for payments has declined consistently for some time, and similar trends are evident in other countries. This has led some observers to predict a cashless society in the future.

In this piece we show that a limit on the level of asset encumbrance and minimum capital requirements are effective tools for minimizing the incentive for banks to take excessive risk.

Quarterly Financial Report - First Quarter 2024 - For the period ended March 31, 2024