Credit and credit aggregates
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Can regulating bank capital help prevent and mitigate financial downturns?
Countercyclical capital buffers are regulatory measures developed in response to the global financial crisis of 2008–09. This note focuses on how time-varying capital buffers can improve financial stability in Canada -
May 21, 2021
Monitoring payment deferrals during the COVID-19 pandemic—update, March 2021
In the initial stages of the COVID-19 pandemic, Canada’s financial institutions allowed households to defer payments on a range of loans. With most of these deferrals having expired, we present updated details of how these loans have performed through to March 2021. -
COVID-19’s impact on the financial health of Canadian businesses: An initial assessment
Despite COVID-19 challenges, bold policy measures in Canada have helped businesses manage cash flow pressures and kept insolvency filings low. But the impact of the pandemic has been uneven, and the financial health of some firms may further deteriorate over the next year. -
Optimal Monetary and Macroprudential Policies
Optimal coordination of monetary and macroprudential policies implies higher risk weights on (safe) bonds any time that banks are required to hold additional capital buffers. Coordination also implies a somewhat tighter monetary-policy stance whenever such capital buffers are released. -
Update on housing market imbalances and household indebtedness
Exceptional strength in the housing market during the pandemic is underpinning Canada’s economic recovery. However, two key vulnerabilities—housing market imbalances and elevated household indebtedness—have intensified. -
Debt-Relief Programs and Money Left on the Table: Evidence from Canada's Response to COVID-19
During the COVID-19 pandemic, Canadian financial institutions offered debt-relief programs to help borrowers cope with job losses and economic insecurity. We consider the low take-up rates for these programs and suggest that to be effective, such programs must be visible and easy to use. -
A Generalized Endogenous Grid Method for Default Risk Models
Models with default options are hard to solve. We propose an extension of the endogenous grid method that solves default risk models more efficiently and accurately. -
February 4, 2021
Monitoring payment deferrals during the COVID-19 pandemic—update, December 2020
During the COVID-19 pandemic, Canada’s financial institutions have allowed households to defer payments on a range of loans. We present updated details of debt payment deferrals by borrowers through to December 2020. -
Consumer Credit with Over-optimistic Borrowers
When lenders cannot directly identify behavioural and rational borrowers, they use type scoring to track the likelihood of a borrower’s type. This leads to the partial pooling of borrowers, which results in rational borrowers subsidizing borrowing costs for behavioural borrowers. This, in turn, reduces the effectiveness of regulatory policies that target mistakes by behavioural borrowers.