Financial stability

• BoC–BoE Sovereign Default Database: What’s new in 2024?

  Staff Analytical Note 2024-19 David Beers, Obiageri Ndukwe, Alex Charron

  The BoC–BoE database of sovereign debt defaults, published and updated annually by the Bank of Canada and the Bank of England, provides comprehensive estimates of stocks of government obligations in default. The 2024 edition updates the historical data and revisits sovereign defaults on local currency debt.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Debt management, Development economics, Financial stability, International financial markets JEL Code(s): F, F3, F34, G, G1, G10, G14, G15

• Could all-to-all trading improve liquidity in the Government of Canada bond market?

  Staff Analytical Note 2024-17 Jabir Sandhu, Rishi Vala

  We find that on any given day, nearly half of Government of Canada bond transactions by clients of dealers can be offset with other clients, including during the turmoil in March 2020. Our results show that under certain conditions clients could potentially trade directly with each other and are a step towards understanding the relevance of broader all-to-all trading in the Government of Canada bond market.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Coronavirus disease (COVID-19), Financial institutions, Financial markets, Financial stability, Market structure and pricing JEL Code(s): D, D4, D47, D5, D53, G, G0, G01, G1, G12, G13, G14, G2, G21, G23

• The Ecology of Automated Market Makers

  Staff Discussion Paper 2024-12 Annetta Ho, Cosmin Cazan, Andrew Schrumm

  This paper describes the ecology of automated market makers, which are the most popular decentralized exchange model for the pricing and trading of crypto assets within decentralized finance.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Digital currencies and fintech, Financial markets, Financial stability, Financial system regulation and policies JEL Code(s): G, G1, G2

• How big is cash-futures basis trading in Canada’s government bond market?

  Staff Analytical Note 2024-16 Andreas Uthemann, Rishi Vala

  Cash-futures basis trading has grown alongside the Government of Canada bond futures market. We examine this growth over time in relation to Government of Canada bond and repurchase agreement markets and provide details on the type of market participants that engage in this type of trading activity.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Financial institutions, Financial markets, Financial stability, Market structure and pricing JEL Code(s): D, D4, D47, D5, D53, G, G1, G12, G2, G23

• Central Bank Liquidity Policy in Modern Times

  Staff Discussion Paper 2024-6 Skylar Brooks

  Across several dimensions of lender of last resort policy, I highlight broad changes that have occurred since the 2008–09 global financial crisis and discuss some of the key challenges, choices and considerations facing the designers of central bank liquidity tools today.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Central bank research, Financial institutions, Financial markets, Financial stability, Lender of last resort JEL Code(s): D, D5, D53, E, E5, E58, E6, E61, G, G0, G01, G2, G21, G23, H, H1, H12
• June 13, 2024

  Reviewing our pandemic actions

  Speech summary Sharon Kozicki Canadian Association for Business Economics Ottawa, Ontario

  Deputy Governor Sharon Kozicki talks about the importance of central bank transparency and accountability. She looks at the exceptional monetary policy measures the Bank of Canada used during the COVID-19 pandemic and analyzes their effectiveness.

  Content Type(s): Press, Speeches and appearances, Speech summaries Topic(s): Central bank research, Coronavirus disease (COVID-19), Credibility, Economic models, Financial stability, Inflation and prices, Inflation targets, Interest rates, Monetary policy, Monetary policy and uncertainty, Monetary policy communications, Recent economic and financial developments
• June 13, 2024

  Exceptional policies for an exceptional time: From quantitative easing to quantitative tightening

  Remarks Sharon Kozicki Canadian Association of Business Economics Ottawa, Ontario

  Deputy Governor Sharon Kozicki discusses the use of exceptional monetary policy tools during the COVID-19 pandemic, as well as the Bank’s commitment to transparency and accountability.

  Content Type(s): Press, Speeches and appearances, Remarks Topic(s): Central bank research, Coronavirus disease (COVID-19), Credibility, Economic models, Financial stability, Inflation and prices, Inflation targets, Interest rates, Monetary policy, Monetary policy and uncertainty, Monetary policy communications, Recent economic and financial developments

• Decomposing Systemic Risk: The Roles of Contagion and Common Exposures

  Staff Working Paper 2024-19 Grzegorz Halaj, Ruben Hipp

  We examine systemic risks within the Canadian banking sector, decomposing them into three contribution channels: contagion, common exposures, and idiosyncratic risk. Through a structural model, we dissect how interbank relationships and market conditions contribute to systemic risk, providing new insights for financial stability.

  Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, Economic models, Financial institutions, Financial stability JEL Code(s): C, C3, C32, C5, C51, G, G2, G21, L, L1, L14
• May 9, 2024

  Release of the Financial Stability Report

  Opening statement Tiff Macklem, Carolyn Rogers Ottawa, Ontario

  Press conference following the release of the Financial Stability Report.

  Content Type(s): Press, Speeches and appearances, Opening statements Topic(s): Asset pricing, Credit risk management, Financial institutions, Financial markets, Financial services, Financial stability, Financial system regulation and policies, Housing, Interest rates, Recent economic and financial developments

• Liquidity risks at Canadian life insurance companies

  Staff Analytical Note 2024-7 Patrick Aldridge, Stephane Gignac, Rishi Vala, Adrian Walton

  We examine how life insurers manage liquidity risks created by their business model. We find that Canadian life insurers did not face significant liquidity draws and continued their usual investment behaviour during the COVID-19 crisis and as interest rates increased in 2022.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Coronavirus disease (COVID-19), Financial institutions, Financial markets, Financial stability, Market structure and pricing JEL Code(s): D, D4, D47, D5, D53, G, G1, G12, G14, G2, G23