IMF Staff Country Reports

Canada: Financial System Stability Assessment

June 24, 2019

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Canada: Financial System Stability Assessment, (USA: International Monetary Fund, 2019) accessed November 8, 2024

Summary

This Financial System Stability Assessment paper discusses that Canada has enjoyed favorable macroeconomic outcomes over the past decades, and its vibrant financial system continues to grow robustly. However, macrofinancial vulnerabilities—notably, elevated household debt and housing market imbalances—remain substantial, posing financial stability concerns. Various parts of the financial system are directly exposed to the housing market and/or linked through housing finance. The financial system would be able to manage severe macrofinancial shocks. Major deposit-taking institutions would remain resilient, but mortgage insurers would need additional capital in a severe adverse scenario. Housing finance is broadly resilient, notwithstanding some weaknesses in the small non-prime mortgage lending segment. Although banks’ overall capital buffers are adequate, additional required capital for mortgage exposures, along with measures to increase risk-based differentiation in mortgage pricing, would be desirable. This would help ensure adequate through-the cycle buffers, improve mortgage risk-pricing, and limit procyclical effects induced by housing market corrections.

Subject: Banking, Financial institutions, Financial sector policy and analysis, Housing prices, Insurance, Insurance companies, Mortgages, Prices, Systemic risk

Keywords: Capital ratio, CR, Credit risk, Financial system, Foreign currency, Global, Government bond, Housing market, Housing prices, IMF staff estimate, Insurance, Insurance companies, ISCR, Mortgage lending, Mortgages, Real GDP, Systemic risk

Publication Details

  • Pages:

    85

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Country Report No. 2019/177

  • Stock No:

    1CANEA2019003

  • ISBN:

    9781498321112

  • ISSN:

    1934-7685

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