Financial system regulation and policies

• A Macroprudential Theory of Foreign Reserve Accumulation

  Staff Working Paper 2019-43 Fernando Arce, Julien Bengui, Javier Bianchi

  This paper proposes a theory of foreign reserves as macroprudential policy. We study an open-economy model of financial crises in which pecuniary externalities lead to overborrowing, and show that by accumulating international reserves, the government can achieve the constrained-efficient allocation.

  Content Type(s): Staff Research, Staff Working Papers Topic(s): Balance of payments and components, Financial stability, Financial system regulation and policies, Foreign reserves management, International financial markets JEL Code(s): D, D5, D52, D6, D62, F, F3, F34

• Financial Frictions, Durable Goods and Monetary Policy

  Staff Working Paper 2019-31 Ugochi Emenogu, Leo Michelis

  Financial frictions affect how much consumers spend on durable and non-durable goods. Borrowers can face both loan-to-value (LTV) constraints and payment-to-income (PTI) constraints.

  Content Type(s): Staff Research, Staff Working Papers Topic(s): Financial system regulation and policies, Monetary policy JEL Code(s): E, E4, E44, E5, E52

• Flight from Safety: How a Change to the Deposit Insurance Limit Affects Households’ Portfolio Allocation

  Staff Working Paper 2019-29 H. Evren Damar, Reint Gropp, Adi Mordel

  Deposit insurance protects depositors from failing banks, thus making insured deposits risk-free. When a deposit insurance limit is increased, some deposits that previously were uninsured become insured, thereby increasing the share of risk-free assets in households’ portfolios. This increase cannot simply be undone by households, because to invest in uninsured deposits, a household must first invest in insured deposits up to the limit. This basic insight is the starting point of the analysis in this paper.

  Content Type(s): Staff Research, Staff Working Papers Topic(s): Financial institutions, Financial system regulation and policies JEL Code(s): D, D1, D14, G, G2, G21, G28, L, L5, L51

• Canadian Securities Lending Market Ecology

  Staff Discussion Paper 2019-5 Jesse Johal, Joanna Roberts, John Sim

  This is the fourth of the Financial Markets Department’s descriptions of Canadian financial industrial organization. The paper discusses the organization of the securities lending market in Canada. We outline key characteristics of securities lending contracts, participants in the securities lending market, the market infrastructures that support securities lending activities, and aggregated statistics describing the Canadian market.

  Content Type(s): Staff Research, Staff Discussion Papers Topic(s): Financial institutions, Financial markets, Financial system regulation and policies, Market structure and pricing JEL Code(s): G, G1, G18, G2, G21, G23
• May 16, 2019

  Release of the Financial System Review

  Opening Statement Stephen S. Poloz 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, Credit and credit aggregates, Financial stability, Financial system regulation and policies, Housing, Regional economic developments, Sectoral balance sheet
• April 26, 2019

  The Road to Digital Money

  

  Stephen Murchison

  From beaver pelts to paper money to digital currencies

  Content Type(s): Publications, The Economy, Plain and Simple Topic(s): Bank notes, Central bank research, Cryptoassets, Cryptocurrencies, Digital currencies and fintech, Financial services, Financial system regulation and policies, Payment clearing and settlement systems

• Disentangling the Factors Driving Housing Resales

  Staff Analytical Note 2019-12 Mikael Khan, Taylor Webley

  We use a recently developed model and loan-level microdata to decompose movements in housing resales since 2015. We find that fundamental factors, namely housing affordability and full-time employment, have had offsetting effects on resales over our study period.

  Content Type(s): Staff Research, Staff Analytical Notes Topic(s): Econometric and statistical methods, Financial stability, Financial system regulation and policies, Housing, Recent economic and financial developments JEL Code(s): C, C2, C22, E, E2, R, R2, R21
• March 14, 2019

  The Age of Leverage

  Remarks Carolyn A. Wilkins UBC Vancouver School of Economics and CFA Society Vancouver Vancouver, British Columbia

  Senior Deputy Governor Carolyn A. Wilkins discusses how high leverage is both a headwind to global growth and a vulnerability in the global financial system.

  Content Type(s): Press, Speeches and appearances, Remarks Topic(s): Balance of payments and components, Credit risk management, Financial institutions, Financial stability, Financial system regulation and policies, Fiscal policy

• Macroprudential Policy with Capital Buffers

  Staff Working Paper 2019-8 Josef Schroth

  The countercyclical capital buffer is part of Basel III, the set of regulatory measures developed in response to the financial crisis of 2007–09. This study focuses on how time-varying capital buffers can address inefficiencies in economies with endogenous financial crises.

  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

• Macroprudential FX Regulations: Shifting the Snowbanks of FX Vulnerability?

  Staff Working Paper 2018-55 Toni Ahnert, Kristin Forbes, Christian Friedrich, Dennis Reinhardt

  Can macroprudential foreign exchange (FX) regulations on banks reduce the financial and macroeconomic vulnerabilities created by borrowing in foreign currency? To evaluate the effectiveness and unintended consequences of macroprudential FX regulations, we develop a parsimonious model of bank and market lending in domestic and foreign currency and derive four predictions.

  Content Type(s): Staff Research, Staff Working Papers Topic(s): Exchange rates, Financial institutions, Financial system regulation and policies, International financial markets JEL Code(s): F, F3, F32, F34, G, G1, G15, G2, G21, G28