Financial system regulation and policies
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June 18, 2018 Rebooting Reference Rates
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. -
A Primer on the Canadian Bankers’ Acceptance Market
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. -
June 7, 2018 The Bank of Canada’s Financial System Survey
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. -
June 7, 2018 Covered Bonds as a Source of Funding for Banks’ Mortgage Portfolios
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. -
June 7, 2018 Establishing a Resolution Regime for Canada’s Financial Market Infrastructures
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. -
June 7, 2018 Release of the Financial System Review
Press conference following the release of the Financial System Review. -
Customer Liquidity Provision in Canadian Bond Markets
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. -
How to Manage Macroeconomic and Financial Stability Risks: A New Framework
Monetary policy decisions need to consider all potential outcomes, not just the most likely path for the economy. This is especially true in the presence of elevated financial system vulnerabilities, which lead to increased downside risks for future growth. -
Order Flow Segmentation, Liquidity and Price Discovery: The Role of Latency Delays
Latency delays—known as “speed bumps”—are an intentional slowing of order flow by exchanges. Supporters contend that delays protect market makers from high-frequency arbitrage, while opponents warn that delays promote “quote fading” by market makers. We construct a model of informed trading in a fragmented market, where one market operates a conventional order book and the other imposes a latency delay on market orders. -
March 22, 2018 Financial Stability: Taking Care of Unfinished Business
Senior Deputy Governor Carolyn A. Wilkins discusses three areas in which work remains to be done to improve financial stability.