Financial stability

• Central Bank Crisis Interventions: A Review of the Recent Literature on Potential Costs

  Staff Discussion Paper 2023-30 Patrick Aldridge, David Cimon, Rishi Vala

  Central banks’ actions to stabilize financial markets and implement monetary policy during crises may come with costs and side effects. We provide a literature review of these costs and discuss measures that may mitigate the negative impacts of crisis actions.

  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): E, E5, E58, G, G1, G10, G2, G20
• November 9, 2023

  Getting used to higher interest rates

  Speech summary Carolyn Rogers Advocis Vancouver Vancouver, British Columbia

  Senior Deputy Governor Carolyn Rogers talks about why interest rates could settle at a higher level than Canadians are used to and why preparing early for that possible outcome is important.

  Content Type(s): Press, Speeches and appearances, Speech summaries Topic(s): Credit risk management, Financial institutions, Financial markets, Financial stability, Firm dynamics, Interest rates, Monetary and financial indicators, Recent economic and financial developments
• November 9, 2023

  Financial stability in a world of higher interest rates

  Remarks Carolyn Rogers Advocis Vancouver Vancouver, British Columbia

  Senior Deputy Governor Carolyn Rogers talks about financial stability in an era of higher interest rates.

  Content Type(s): Press, Speeches and appearances, Remarks Topic(s): Credit risk management, Financial institutions, Financial markets, Financial stability, Firm dynamics, Interest rates, Monetary and financial indicators, Recent economic and financial developments

• Decentralized finance: Innovations and challenges

  Staff Analytical Note 2023-15 Jonathan Chiu, Hanna Yu

  Decentralized finance surged in popularity around 2020. We explore its value and limitations and highlight some potential regulatory concerns.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Digital currencies and fintech, Financial stability, Payment clearing and settlement systems JEL Code(s): G, G1, G2

• Should Banks Be Worried About Dividend Restrictions?

  Staff Working Paper 2023-49 Josef Schroth

  A regulator would want to restrict dividends to force banks to rebuild capital during a crisis. But such a policy is not time-consistent. A time-consistent policy would let banks gradually rebuild capital and pay dividends even when their equity remains below pre-crisis levels.

  Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Credit and credit aggregates, Credit risk management, Financial stability, Financial system regulation and policies, Lender of last resort JEL Code(s): E, E1, E13, E3, E32, E4, E44

• Do hedge funds support liquidity in the Government of Canada bond market?

  Staff Analytical Note 2023-11 Jabir Sandhu, Rishi Vala

  While Government of Canada bond transactions of hedge funds are typically in the opposite direction to those of other market participants, during the peak period of market turmoil in March 2020, hedge funds sold these bonds, just as other market participants did. This shows that hedge funds can at times contribute to one-sided markets and amplify declines in market liquidity.

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

• BoC–BoE Sovereign Default Database: What’s new in 2023?

  Staff Analytical Note 2023-10 David Beers, Obiageri Ndukwe, Karim McDaniels, 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 2023 edition includes a new section about the characteristics of sovereign defaults and provides new visuals showing regional debt in default.

  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

• BoC–BoE Sovereign Default Database: Appendix and References

  Technical Report No. 125 David Beers, Obiageri Ndukwe, Alex Charron

  Since 2014, the Bank of Canada (BoC) has maintained a comprehensive database of sovereign defaults to systematically measure and aggregate the nominal value of the different types of sovereign government debt in default. The database is posted on the BoC’s website and is updated annually in partnership with the Bank of England (BoE).

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

• BoC–BoE Sovereign Default Database: Methodology and Assumptions

  Technical Report No. 124 David Beers, Obiageri Ndukwe, Alex Charron

  The Bank of Canada (BoC), in partnership with the Bank of England (BoE), developed a comprehensive database of sovereign defaults in 2014. The database is posted on the Bank of Canada’s website and updated annually. The BoC–BoE database draws on datasets published by various public and private sector sources. It combines elements of these, together with new information, to develop comprehensive estimates of stocks of government obligations in default.

  Content Type(s): Staff research, Technical reports Topic(s): Debt management, Development economics, Financial stability, International financial markets JEL Code(s): F, F3, F34, G, G1, G10, G14, G15
• May 18, 2023

  Release of the Financial System Review

  Opening statement Tiff Macklem, Carolyn Rogers Ottawa, Ontario

  Press conference following the release of the Financial System Review.

  Content Type(s): Press, Speeches and appearances, Opening statements Topic(s): Financial institutions, Financial markets, Financial stability, Financial system regulation and policies, Interest rates, International financial markets, Recent economic and financial developments, Wholesale funding