Financial Institutions
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Loan Insurance, Market Liquidity, and Lending Standards
Third parties often assume default risk at loan origination in return for a fee. Insurance, various guarantees and external credit enhancements protect the owner of the loan against borrower default. Governments often assume such default risk through guarantees for various types of loans, including mortgages, student loans and small business loans. -
Assessment of Liquidity Creation in the Canadian Banking System
Liquidity creation is a fundamental function of banks. It provides the public with easy access to funds. These funds are important because they allow households and businesses to consume and invest. In this note, we measure liquidity creation by Canadian financial institutions from the first quarter of 2012 to the second quarter of 2019, using a methodology suggested by Berger and Bouwman (2009) and known as the BB measure. -
November 19, 2019
Financial Stability in an Uncertain World (Full Remarks)
Senior Deputy Governor Carolyn A. Wilkins provides an update on the Canadian financial system and discusses measures in place that increase its resilience in a challenging global environment. -
November 19, 2019
Financial Stability in an Uncertain World
Senior Deputy Governor Carolyn A. Wilkins talks about the recent strengthening of Canada’s financial system. -
Resolving Failed Banks: Uncertainty, Multiple Bidding & Auction Design
Bank resolution is costly. In the United States, the Federal Deposit Insurance Corporation (FDIC) typically resolves failing banks by auction. -
Flight from Safety: How a Change to the Deposit Insurance Limit Affects Households’ Portfolio Allocation
Deposit insurance protects depositors from failing banks, thus making insured deposits risk-free. When a deposit insurance limit is increased, some deposits that previously were uninsured become insured, thereby increasing the share of risk-free assets in households’ portfolios. This increase cannot simply be undone by households, because to invest in uninsured deposits, a household must first invest in insured deposits up to the limit. This basic insight is the starting point of the analysis in this paper. -
The Effects of Inflation Targeting for Financial Development
The adoption of inflation targeting (IT) by central banks leads to an increase of 10 to 20 percent in measures of financial development, with a lag. We also find evidence that the financial sector benefits of IT adoption were higher for early-adopting central banks. -
Canadian Securities Lending Market Ecology
This is the fourth of the Financial Markets Department’s descriptions of Canadian financial industrial organization. The paper discusses the organization of the securities lending market in Canada. We outline key characteristics of securities lending contracts, participants in the securities lending market, the market infrastructures that support securities lending activities, and aggregated statistics describing the Canadian market. -
Systemic Risk and Collateral Adequacy
Many derivatives markets use collateral requirements calculated with industry-standard but dated methods that are not designed with systemic risk in mind. This paper explores whether the conservative nature of conventional collateral requirements outweighs their lack of consideration of systemic risk. -
Assessing the Resilience of the Canadian Banking System
The stability of the Canadian financial system, as well as its ability to support the Canadian economy, depends on the ability of financial institutions to absorb and manage major shocks. This is especially true for large banks, which perform services essential to the Canadian economy.