G21 - Banks; Depository Institutions; Micro Finance Institutions; Mortgages
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The “Too Big to Fail” Subsidy in Canada: Some Estimates
Implicit government guarantees of banking-sector liabilities reduce market discipline by private sector stakeholders and temper the risk sensitivity of funding costs. This potentially increases the likelihood of bailouts from taxpayers, especially in the absence of effective resolution frameworks. -
Government of Canada Securities in the Cash, Repo and Securities Lending Markets
This paper documents the properties of Government of Canada securities in cash, repo and securities lending transactions over their life cycle. By tracking every security from issuance to maturity, we are able to highlight inter-linkages between the markets for cash and for specific securities. -
A Calibrated Model of Intraday Settlement
This paper estimates potential exposures, netting benefits and settlement gains by merging retail and wholesale payments into batches and conducting multiple intraday settlements in this hypothetical model of a single "calibrated payments system." The results demonstrate that credit risk exposures faced by participants in the system are largely dependent on their relative activity in the retail and wholesale payments systems. -
Tail Risk in a Retail Payment System: An Extreme-Value Approach
The increasing importance of risk management in payment systems has led to the development of an array of sophisticated tools designed to mitigate tail risk in these systems. In this paper, we use extreme value theory methods to quantify the level of tail risk in the Canadian retail payment system (ACSS) for the period from 2002 to 2015. -
Credit Risk Transfer and Bank Insolvency Risk
The present paper shows that, everything else equal, some transactions to transfer portfolio credit risk to third-party investors increase the insolvency risk of banks. This is particularly likely if a bank sells the senior tranche and retains a sufficiently large first-loss position. -
Recent Evolution of Canada’s Credit-to-GDP Gap: Measurement and Interpretation
Over the past several years, the Bank for International Settlements has noted that Canada’s credit-to-GDP gap has widened and is above thresholds indicating future banking stress. -
A Barometer of Canadian Financial System Vulnerabilities
This note presents a composite indicator of Canadian financial system vulnerabilities—the Vulnerabilities Barometer. It aims to complement the Bank of Canada’s vulnerabilities assessment by adding a quantitative and synthesized perspective to the more granular (distributional) analysis presented in the Financial System Review. -
What Drives Episodes of Settlement Fails in the Government of Canada Bond Market?
We study settlement fails for trades in the Government of Canada bond market. We find that settlement fails do not occur independently. Using a novel and comprehensive dataset, we examine three drivers of fails. -
November 28, 2017 Shoring Up the Foundations for a More Resilient Banking System: The Development of Basel III
The authors trace the development of the Basel III standards for banking regulation. Basel III builds on two earlier frameworks, in response to weaknesses revealed during the global financial crisis. They highlight how implementation of the standards will underpin greater financial stability and provide a sound foundation for economic growth. -
November 28, 2017 Analysis of Household Vulnerabilities Using Loan-Level Mortgage Data
This report examines detailed data on home mortgages to provide a better understanding of the vulnerabilities associated with the mortgage market. The proportion of low-ratio mortgages is growing, particularly in regions with strong house price growth. Moreover, these borrowers exhibit less flexibility to adverse shocks, since they have high debt levels relative to income and have taken mortgages with long amortization periods.