Information Contagion and Systemic Risk
We examine the effect of ex-post information contagion on the ex-ante level of systemic risk defined as the probability of joint bank default.
Financial institutions
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Fintech: Is This Time Different? A Framework for Assessing Risks and Opportunities for Central Banks
We investigate the risks and opportunities to the mandates of central banks arising from fintech developments. -
June 8, 2017
Using Market-Based Indicators to Assess Banking System Resilience
This report reviews the use of quantitative tools to gauge market participants’ assessment of banking system resilience. These measures complement traditional balance-sheet metrics and suggest that markets consider large Canadian banks to be better placed to weather adverse shocks than banks in other advanced economies. Compared with regulatory capital ratios, however, the measures suggest less improvement in banking system resilience since the pre-crisis period. -
May 11, 2017
Wholesale Funding of the Big Six Canadian Banks
The Big Six Canadian banks are a dominant component of the Canadian financial system. How they finance their business activities is fundamental to how effective they are. Retail and commercial deposits along with wholesale funding represent the two major sources of funds for Canadian banks. What wholesale funding instruments do the Big Six banks use? How do they choose between different funding sources, funding strategies and why? How have banks changed their funding mix since the 2007–09 global financial crisis? -
Strategic Complementarities and Money Market Fund Liquidity Management
Following the financial crisis, there has been increased regulatory focus on the management of liquidity in mutual funds and, specifically, whether funds hold enough liquidity to guard against the potential for investor runs. -
The Costs of Point-of-Sale Payments in Canada
Using data from our 2014 cost-of-payments survey, we calculate resource costs for cash, debit cards and credit cards. For each payment method, we examine the total cost incurred by consumers, retailers, financial institutions and infrastructures, the Royal Canadian Mint and the Bank of Canada. -
Optimal Capital Regulation
We study constrained-efficient bank capital regulation in a model with market-imposed equity requirements. Banks hold equity buffers to insure against sudden loss of access to funding. However, in the model, banks choose to only partially self-insure because equity is privately costly. -
Non-Bank Investors and Loan Renegotiations
We document that the structure of syndicates affects loan renegotiations. Lead banks with large retained shares have positive effects on renegotiations. In contrast, more diverse syndicates deter renegotiations, but only for credit lines. -
December 15, 2016
The Rise of Mortgage Finance Companies in Canada: Benefits and Vulnerabilities
The Rise of Mortgage Finance Companies in Canada: Benefits and Vulnerabilities, by Don Coletti, Marc-André Gosselin and Cameron MacDonald, examines the increased importance of mortgage finance companies (MFCs) in the Canadian mortgage market. The authors discuss the MFC business model, highlighting MFCs’ relationship with mortgage brokers and banks, as well as the benefits they bring to Canadian borrowers. The authors conclude with a discussion of the impact of MFCs on financial system vulnerabilities.
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December 15, 2016
Monitoring Shadow Banking in Canada: A Hybrid Approach
In Monitoring Shadow Banking in Canada: A Hybrid Approach, Bo Young Chang, Michael Januska, Gitanjali Kumar and André Usche discuss how lending that occurs outside the traditional banking system provides benefits to the economy but must be monitored carefully for potential financial sector vulnerabilities. They describe how the Bank defines and measures shadow banking and how it assesses vulnerabilities in the sector, using an approach that examines both markets and entities.