December 10, 2014 Cyber Security: Protecting the Resilience of Canada’s Financial System Financial System Review - December 2014 Harold Gallagher, Wade McMahon, Ron Morrow Harold Gallagher, Wade McMahon and Ron Morrow examine the various sources of cyber attacks and their potential for systemic risk. Against this background, the report highlights efforts being made to protect against cyber-security threats, including individual and collective actions by financial institutions and financial market infrastructures, as well as initiatives by international organizations, regulatory authorities and governments. The authors then describe the coordination, under the Joint Operational Resilience Management program, of private and public sector actions in Canada for managing and testing capabilities during severe operational events such as cyber attacks. Content Type(s): Publications, Financial System Review articles Topic(s): Financial stability, Financial system regulation and policies, Payment clearing and settlement systems JEL Code(s): G, G2, G20, G23, G28
June 12, 2014 Reforming Financial Benchmarks: An International Perspective Financial System Review - June 2014 Thomas Thorn, Harri Vikstedt Thomas Thorn and Harri Vikstedt examine the efforts being taken internationally and in Canada to enhance the governance and integrity of financial benchmarks. The report provides an overview of how interbank interest rate benchmarks are set and describes the weaknesses in the process that were exposed by the financial crisis. It also explains recent policy developments designed to make global and Canadian interbank benchmarks more robust. Content Type(s): Publications, Financial System Review articles Topic(s): Financial markets, Financial system regulation and policies, Recent economic and financial developments JEL Code(s): G, G1, G11
June 12, 2014 Making Banks Safer: Implementing Basel III Financial System Review - June 2014 Éric Chouinard, Graydon Paulin Éric Chouinard and Graydon Paulin review the progress to date in implementing Basel III, the new framework of global regulatory standards for the banking sector developed by the Basel Committee on Banking Supervision. The report highlights the expected net benefits of implementing Basel III, as well as the challenges in ensuring international consistency in measuring the risk-weighted capital of banks. It includes a discussion on how implementing Basel III has affected the banking system in Canada and other important jurisdictions, and demonstrates the need for ongoing assessment of the effects on the financial system and the macroeconomy. Content Type(s): Publications, Financial System Review articles Topic(s): Financial institutions, Financial system regulation and policies JEL Code(s): G, G2, G28
Rollover Risk, Liquidity and Macroprudential Regulation Staff Working Paper 2014-23 Toni Ahnert I study rollover risk in the wholesale funding market when intermediaries can hold liquidity ex ante and are subject to fire sales ex post. Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions, Financial system regulation and policies JEL Code(s): G, G0, G01, G1, G11, G2, G28
A Policy Model to Analyze Macroprudential Regulations and Monetary Policy Staff Working Paper 2014-6 Sami Alpanda, Gino Cateau, Césaire Meh We construct a small-open-economy, New Keynesian dynamic stochastic general-equilibrium model with real-financial linkages to analyze the effects of financial shocks and macroprudential policies on the Canadian economy. Our model has four key features. Content Type(s): Staff research, Staff working papers Topic(s): Economic models, Financial system regulation and policies JEL Code(s): E, E1, E17, E3, E32, E4, E44, F, F4, F41
Lessons from the Financial Crisis: Bank Performance and Regulatory Reform Staff Discussion Paper 2013-4 Neville Arjani, Graydon Paulin The financial systems of some countries fared materially better than others during the global financial crisis of 2007-09. Content Type(s): Staff research, Staff discussion papers Topic(s): Financial institutions, Financial system regulation and policies JEL Code(s): G, G2, G21, G28
The ‘Celtic Crisis’: Guarantees, Transparency and Systemic Liquidity Risk Staff Working Paper 2013-31 Philipp König, Kartik Anand, Frank Heinemann Bank liability guarantee schemes have traditionally been viewed as costless measures to shore up investor confidence and prevent bank runs. However, as the experiences of some European countries, most notably Ireland, have demonstrated, the credibility and effectiveness of these guarantees are crucially intertwined with the sovereign’s funding risks. Content Type(s): Staff research, Staff working papers Topic(s): Financial stability, Financial system regulation and policies JEL Code(s): D, D8, D89, G, G0, G01, G2, G28
Why Do Emerging Markets Liberalize Capital Outflow Controls? Fiscal versus Net Capital Flow Concerns Staff Working Paper 2013-21 Joshua Aizenman, Gurnain Pasricha In this paper, we provide empirical evidence on the factors that motivated emerging economies to change their capital outflow controls in recent decades. Liberalization of capital outflow controls can allow emerging-market economies (EMEs) to reduce net capital inflow (NKI) pressures, but may cost their governments the fiscal revenues that external financial repression generates. Content Type(s): Staff research, Staff working papers Topic(s): Debt management, Financial system regulation and policies, International topics, Recent economic and financial developments JEL Code(s): F, F3, F32, G, G1, G15
February 21, 2013 Conference Summary: Financial Intermediation and Vulnerabilities Bank of Canada Review - Winter 2012-2013 Jason Allen, James Chapman, Ian Christensen The Bank of Canada’s annual economic conference, held in October 2012, brought together experts from across Canada and around the world to discuss key issues concerning financial intermediation and vulnerabilities. The conference covered such topics as household finances and their relationship to financial stability, as well as bank regulation, securitization and shadow banking. Content Type(s): Publications, Bank of Canada Review articles Topic(s): Central bank research, Financial stability, Financial system regulation and policies JEL Code(s): G, G2
Real-financial Linkages through Loan Default and Bank Capital Staff Working Paper 2013-3 Tamon Takamura Many studies in macroeconomics argue that financial frictions do not amplify the impacts of real shocks. This finding is based on models without endogenous default on loans and bank capital. Using a model featuring endogenous interactions between firm default and bank capital, this paper revisits the propagation mechanisms of real and financial shocks. Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions, Financial stability, Financial system regulation and policies, Interest rates JEL Code(s): E, E3, E32, E4, E44, E6, E69