Financial system regulation and policies

• Prudential Liquidity Regulation in Banking—A Literature Review

  Staff Discussion Paper 2018-8 Adi Mordel

  Prudential liquidity requirements are a relatively recent regulatory tool on the international front, introduced as part of the Basel III accord in the form of a liquidity coverage ratio (LCR) and a net stable funding ratio (NSFR). I first discuss the rationale for regulating bank liquidity by highlighting the market failures that it addresses while reviewing key theoretical contributions to the literature on the motivation for prudential liquidity regulation.

  Content Type(s): Staff Research, Staff Discussion Papers Topic(s): Financial Institutions, Financial system regulation and policies JEL Code(s): G, G2, G21, G28

• The Characteristics of Uninsured Mortgages and their Securitization Potential

  Staff Analytical Note 2018-24 Adi Mordel, Maria teNyenhuis

  Following changes to housing finance policies that target insured mortgages, uninsured mortgage credit has been growing. This robust growth creates a larger pool of mortgages that may be suitable for private-label residential mortgage-backed securities (RMBS).

  Content Type(s): Staff Research, Staff Analytical Notes Topic(s): Financial Institutions, Financial system regulation and policies, Wholesale funding JEL Code(s): G, G2, G21, G28
• June 18, 2018

  Rebooting Reference Rates

  Remarks Lynn Patterson Investment Industry Association of Canada and Institute of International Finance Toronto, Ontario

  Deputy Governor Lynn Patterson discusses the efforts in multiple jurisdictions to strengthen LIBOR and similar benchmarks and work underway in Canada to consider a new risk-free benchmark for the Canadian dollar market.

  Content Type(s): Press, Speeches Topic(s): Financial Institutions, Financial markets, Financial system regulation and policies, Market structure and pricing

• A Primer on the Canadian Bankers’ Acceptance Market

  Staff Discussion Paper 2018-6 Kaetlynd McRae, Danny Auger

  This paper discusses how the bankers’ acceptance (BA) market in Canada is organized and its essential link to the Canadian Dollar Offered Rate (CDOR). Globally, BAs are a niche product used only in a limited number of jurisdictions.

  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
• June 7, 2018

  The Bank of Canada’s Financial System Survey

  Financial System Review - June 2018 Guillaume Bédard-Pagé, Ian Christensen, Scott Kinnear, Maxime Leboeuf

  This report presents the details of a new semi-annual survey that will improve the Bank of Canada’s surveillance across the financial system and deepen efforts to engage with financial system participants. The survey collects expert opinions on the risks to and resilience of the Canadian financial system as well as on emerging trends and financial innovations. The report presents an overview of the survey and provides high-level results from the spring 2018 survey.

  Content Type(s): Publications, Financial System Review Article Topic(s): Financial Institutions, Financial markets, Financial services, Financial stability, Financial system regulation and policies, Recent economic and financial developments JEL Code(s): C, C8, C83, G, G1, G11, G18, G2, G28, G3, G32
• June 7, 2018

  Covered Bonds as a Source of Funding for Banks’ Mortgage Portfolios

  Financial System Review - June 2018 Toni Ahnert

  The author traces developments in the Canadian covered bond market. Covered bonds could be a valuable way to provide a stable and diverse source of funding, particularly for smaller banks. However, higher issuance could increase banks’ vulnerability to liquidity stress, with implications for the broader financial system. The author argues that these benefits and challenges can be balanced in a well-designed policy framework.

  Content Type(s): Publications, Financial System Review Article Topic(s): Financial Institutions, Financial stability, Financial system regulation and policies JEL Code(s): G, G1, G2, G21, G28
• June 7, 2018

  Establishing a Resolution Regime for Canada’s Financial Market Infrastructures

  Financial System Review - June 2018 Elizabeth Woodman, Lucia Chung, Nikil Chande

  This report highlights how an effective resolution regime promotes financial stability. It does this by ensuring that financial market infrastructures (FMIs) would be able to continue to provide their critical functions during a period of stress when an FMI’s own recovery measures were failing. The report explains the Bank of Canada’s new role as the resolution authority for FMIs, which will further bolster financial system resilience.

  Content Type(s): Publications, Financial System Review Article Topic(s): Financial Institutions, Financial markets, Financial stability, Financial system regulation and policies, Payment clearing and settlement systems JEL Code(s): G, G1, G10, G19, G2, G20, G28, G29
• June 7, 2018

  Release of the Financial System Review

  Opening Statement Stephen S. Poloz, Carolyn A. Wilkins Ottawa, Ontario

  Press conference following the release of the Financial System Review.

  Content Type(s): Press, Speeches Topic(s): Credit and credit aggregates, Financial stability, Financial system regulation and policies, Housing, Regional economic developments, Sectoral balance sheet

• Customer Liquidity Provision in Canadian Bond Markets

  Staff Analytical Note 2018-12 Corey Garriott, Jesse Johal

  This analytical note assesses the prevalence of liquidity provision by institutional investors in Canadian bonds. We find that the practice is not prevalent in Canada. Customer liquidity provision is more prevalent for less liquid bonds, on days when liquidity is already expensive or when there are larger trading volumes. In our interpretation, Canadian dealers draw on customer liquidity as a supplementary source of liquidity and only when necessary, given its cost.

  Content Type(s): Staff Research, Staff Analytical Notes Topic(s): Financial Institutions, Financial markets, Financial system regulation and policies, Market structure and pricing, Recent economic and financial developments JEL Code(s): G, G1, G14, G2, G20, L, L1

• How to Manage Macroeconomic and Financial Stability Risks: A New Framework

  Staff Analytical Note 2018-11 Alexander Ueberfeldt, Thibaut Duprey

  Financial system vulnerabilities increase the downside risk to future GDP growth. Macroprudential tightening significantly reduces financial stability risks associated with vulnerabilities. Monetary policy faces a trade-off between financial stability and macroeconomic risks.

  Content Type(s): Staff Research, Staff Analytical Notes Topic(s): Central bank research, Economic models, Financial stability, Financial system regulation and policies, Interest rates, Monetary Policy, Monetary policy framework JEL Code(s): E, E4, E44, E5, E52, E58, G, G0, G01