Credit and credit aggregates, Financial institutions, Financial markets, Financial services, Financial stability, Financial system regulation and policies, International financial markets, Lender of last resort, Market structure and pricing, Monetary policy implementation, Payment clearing and settlement systems
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A Microfounded Design of Interconnectedness-Based Macroprudential Policy
To address the challenges posed by global systemically important banks (G-SIBs), the Basel Committee on Banking Supervision recommended an “additional loss absorbency requirement” for these institutions. Along these lines, I develop a microfounded design of capital surcharges that target the interconnectedness component of systemic risk. -
February 24, 2016
Connecting the Dots: Elevated Household Debt and the Risk to Financial Stability
Deputy Governor Lawrence Schembri discusses household debt, the risk it poses to financial stability and the role of the Bank of Canada. -
To Share or Not to Share? Uncovered Losses in a Derivatives Clearinghouse
This paper studies how the allocation of residual losses affects trading and welfare in a central counterparty. I compare loss sharing under two loss-allocation mechanisms – variation margin haircutting and cash calls – and study the privately and socially optimal degree of loss sharing. -
Limits to Arbitrage and Deviations from Covered Interest Rate Parity
We document an increase in deviations from short-term covered interest rate parity (CIP) in the first half of 2015. Since the Swiss National Bank’s (SNB) decision to abandon its minimum exchange rate policy, both the magnitude and volatility of deviations from CIP have increased across several currency pairs. The effect is particularly pronounced for pairs involving the Swiss franc. -
February 8, 2016
Monetary Policy and Financial Stability—Looking for the Right Tools
Deputy Governor Tim Lane discusses the links between monetary policy and financial stability.