Financial system regulation and policies

• Housing Affordability and Parental Income Support

  Staff Working Paper 2024-28 Jason Allen, Kyra Carmichael, Robert Clark, Shaoteng Li, Nicolas Vincent

  In many countries, the cost of housing has greatly outpaced income growth, leading to a housing affordability crisis. Leveraging Canadian loan-level data and quasi-experimental variation in payment-to-income constraints, we document an increasing reliance of first-time homebuyers on financial help from their parents, through mortgage co-signing. We show that parental support can effectively relax borrowing constraints—potentially to riskier borrowers.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial services, Financial system regulation and policies, Housing JEL Code(s): D, D6, D64, E, E2, E21, E24, G, G1, G18, G5, G51

• Credit Card Minimum Payment Restrictions

  Staff Working Paper 2024-26 Jason Allen, Michael Boutros, Benedict Guttman-Kenney

  We study a government policy that restricts repayment choices with the aim of reducing credit card debt and estimate its effects by applying a difference-in-differences methodology to comprehensive credit-reporting data about Canadian consumers. We find the policy has trade-offs: reducing revolving debt comes at a cost of reducing credit access, and potentially increasing delinquency.

  Content Type(s): Staff research, Staff working papers Topic(s): Credit and credit aggregates, Financial system regulation and policies JEL Code(s): D, D1, D18, E, E2, E21, G, G2, G28, G5, G51

• 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

• Assessing the Impact of the Bank of Canada’s Government Bond Purchases

  Staff Discussion Paper 2024-5 Chinara Azizova, Jonathan Witmer, Xu Zhang

  In March 2020, the Bank of Canada implemented the Government of Canada Bond Purchase Program, eventually purchasing approximately $340 billion of government bonds. In this paper, we analyze the impact of this program on financial market prices and yields as well as on GDP and inflation.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Financial institutions, Financial markets, Financial system regulation and policies, Inflation and prices, Monetary policy, Monetary policy transmission JEL Code(s): E, E5, E52, E58, G, G2, G21, G28

• Financial Intermediation and Fire Sales with Liquidity Risk Pricing

  Staff Working Paper 2024-18 Yuteng Cheng, Roberto Robatto

  We provide a theory of fire sales in which potential buyers are subject to liquidity shocks and frictions that limit their ability to resell assets. Viewed through the lens of the model, the liquidity requirements proposed by the U. S. Securities and Exchange Commission for these intermediaries could hurt the economy.

  Content Type(s): Staff research, Staff working papers Topic(s): Asset pricing, Financial markets, Financial system regulation and policies JEL Code(s): G, G1, G12, G2, G23, G28

• Finding a Needle in a Haystack: A Machine Learning Framework for Anomaly Detection in Payment Systems

  Staff Working Paper 2024-15 Ajit Desai, Anneke Kosse, Jacob Sharples

  Our layered machine learning framework can enhance real-time transaction monitoring in high-value payment systems, which are a central piece of a country’s financial infrastructure. When tested on data from Canadian payment systems, it demonstrated potential for accurately identifying anomalous transactions. This framework could help improve cyber and operational resilience of payment systems.

  Content Type(s): Staff research, Staff working papers Topic(s): Digital currencies and fintech, Financial institutions, Financial services, Financial system regulation and policies, Payment clearing and settlement systems JEL Code(s): C, C4, C45, C5, C55, D, D8, D83, E, E4, E42
• 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
• March 21, 2024

  Getting to a new normal

  Speech summary Toni Gravelle CFA Society Toronto Toronto, Ontario

  Deputy Governor Toni Gravelle speaks about how the Bank of Canada will manage its balance sheet once quantitative tightening ends.

  Content Type(s): Press, Speeches and appearances, Speech summaries Topic(s): Coronavirus disease (COVID-19), Financial institutions, Financial markets, Financial system regulation and policies, Lender of last resort, Monetary policy implementation, Payment clearing and settlement systems, Recent economic and financial developments
• March 21, 2024

  Going back to normal: The Bank of Canada’s balance sheet after quantitative tightening

  Remarks Toni Gravelle CFA Society Toronto Toronto, Ontario

  Deputy Governor Toni Gravelle provides an update on quantitative tightening and talks about how the Bank of Canada will manage its balance sheet once normalization ends.

  Content Type(s): Press, Speeches and appearances, Remarks Topic(s): Coronavirus disease (COVID-19), Financial institutions, Financial markets, Financial system regulation and policies, Lender of last resort, Monetary policy implementation, Payment clearing and settlement systems, Recent economic and financial developments

• Procyclicality in Central Counterparty Margin Models: A Conceptual Tool Kit and the Key Parameters

  Staff Discussion Paper 2023-34 Alper Odabasioglu

  Regulators need to provide effective procyclicality guidance, and central counterparties must design and calibrate their margin systems and procyclicality frameworks appropriately. To serve these needs, we provide a novel conceptual tool kit. Further, we highlight that the focus should be on the key margin system parameters in determining procyclicality.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Coronavirus disease (COVID-19), Credit risk management, Financial institutions, Financial markets, Financial stability, Financial system regulation and policies JEL Code(s): G, G0, G01, G2, G23, G28