Financial system regulation and policies

• October 7, 2021

  The long and short of it: A balanced vision for the international monetary and financial system

  Remarks (delivered virtually) Tiff Macklem Council on Foreign Relations Washington, D.C.

  Governor Tiff Macklem advocates for global coordination to strengthen the international monetary and financial system.

  Content Type(s): Press, Speeches and appearances, Remarks Topic(s): Development economics, Exchange rate regimes, Financial system regulation and policies, Foreign reserves management, International financial markets, International topics, Trade integration
• October 7, 2021

  Investing in global progress

  Speech summary Tiff Macklem Council on Foreign Relations Washington, D.C.

  Governor Tiff Macklem makes the case for greater cooperation to shape a stronger international monetary and financial system.

  Content Type(s): Press, Speeches and appearances, Speech summaries Topic(s): Development economics, Exchange rate regimes, Financial system regulation and policies, Foreign reserves management, International financial markets, International topics, Trade integration

• A Q-Theory of Banks

  Staff Working Paper 2021-44 Juliane Beganau, Saki Bigio, Jeremy Majerovitz, Matías Vieyra

  Using stock market data on banks, we show that the book value of loans recognizes losses with a delay. This delayed accounting is important for regulation because the requirements regulators impose are based on book values.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions, Financial stability, Financial system regulation and policies JEL Code(s): E, E4, E44, G, G2, G21, G3, G32, G33

• Reaching for yield or resiliency? Explaining the shift in Canadian pension plan portfolios

  Staff Analytical Note 2021-20 Sébastien Betermier, Nicholas Byrne, Jean-Sébastien Fontaine, Hayden Ford, Jason Ho, Chelsea Mitchell

  “Reach for yield”—This is the commonly heard explanation for why pension plans shift their portfolios toward alternative assets. But we show that the new portfolios also hold more bonds, offer lower average returns and produce smaller and less volatile solvency deficits. These shifts are part of a broader strategy to reduce solvency risk.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Financial institutions, Financial markets, Financial system regulation and policies JEL Code(s): G, G1, G11

• Stressed but not Helpless: Strategic Behaviour of Banks Under Adverse Market Conditions

  Staff Working Paper 2021-35 Grzegorz Halaj, Sofia Priazhkina

  Our stress-testing tool considers banks under stress that can strategically manage their balance sheets. Using confidential Canadian supervisory data, we assess whether bank behaviour to maximize shareholder value can amplify a hypothetical stress scenario.

  Content Type(s): Staff research, Staff working papers Topic(s): Central bank research, Economic models, Financial institutions, Financial stability, Financial system regulation and policies JEL Code(s): C, C6, C63, C7, C72, G, G2, G21

• An Optimal Macroprudential Policy Mix for Segmented Credit Markets

  Staff Working Paper 2021-31 Jelena Zivanovic

  How can macroprudential policy and monetary policy stabilize segmented credit markets? Is there a trade-off between financial stability and price stability? I use a theoretical model to evaluate the performance of alternative policies and find the optimal mix of macroprudential and monetary policy in response to aggregate shocks.

  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 JEL Code(s): E, E3, E30, E4, E44, E5, E50

• Bank Runs, Bank Competition and Opacity

  Staff Working Paper 2021-30 Toni Ahnert, David Martinez-Miera

  How is the stability of the financial sector affected by competition in the deposit market and by decisions banks make about transparency? We find that policies that aim to increase bank competition lead to higher bank deposit rates, increasing both withdrawal incentives and instability.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions, Financial markets, Financial stability, Financial system regulation and policies, Wholesale funding JEL Code(s): G, G0, G01, G2, G21

• Can regulating bank capital help prevent and mitigate financial downturns?

  Staff Analytical Note 2021-12 Alejandro García, Josef Schroth

  Countercyclical capital buffers are regulatory measures developed in response to the global financial crisis of 2008–09. This note focuses on how time-varying capital buffers can improve financial stability in Canada

  Content Type(s): Staff research, Staff analytical notes 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
• May 20, 2021

  Release of the Financial System Review

  Opening statement Tiff Macklem Ottawa, Ontario

  Press conference following the release of the Financial System Review.

  Content Type(s): Press, Speeches and appearances, Opening statements Topic(s): Climate change, Cyber security, Financial markets, Financial stability, Financial system regulation and policies, Housing, Recent economic and financial developments

• Optimal Monetary and Macroprudential Policies

  Staff Working Paper 2021-21 Josef Schroth

  Macroprudential policy should aim for bank balance sheets that are larger and safer during normal times but smaller and riskier during financial crises. During recoveries from financial crises, monetary policy should complement macroprudential policy by being less expansive than what would be required to close the labour gap.

  Content Type(s): Staff research, Staff working papers Topic(s): Credit and credit aggregates, Financial stability, Financial system regulation and policies, Inflation targets, Monetary policy JEL Code(s): E, E4, E44, E6, E60, G, G2, G21, G28