Canada: Financial System Stability Assessment

IMF Staff Country Reports, June 24, 2019

Source details

Canonical URL

Canada: Financial System Stability Assessment

Other formats

• Markdown version
• Structured JSON version
• Bundle manifest

Bibliographic details

• Published: June 24, 2019
• Series: IMF Staff Country Reports
• DOI: https://doi.org/10.5089/9781498321112.002

Overview and key findings

• Canada has "enjoyed favorable macroeconomic outcomes over the past decades, and its vibrant financial system continues to grow robustly."
• Significant macrofinancial vulnerabilities remain, "notably, elevated household debt and housing market imbalances," which "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."
• Objectives of suggested measures: "ensure adequate through-the cycle buffers, improve mortgage risk-pricing, and limit procyclical effects induced by housing market corrections."

Risk exposures and vulnerabilities

• Elevated household debt and housing market imbalances are identified as the principal sources of macrofinancial vulnerability.
• Direct and indirect linkages to housing finance create system-wide exposure across multiple financial subsectors.
• Small non-prime mortgage lending segment identified as a weakness within housing finance.

Resilience under stress

• System-wide statement: the financial system "would be able to manage severe macrofinancial shocks."
• Institution-specific outcomes:
  • "Major deposit-taking institutions would remain resilient."
  • "Mortgage insurers would need additional capital in a severe adverse scenario."

Policy implications and recommendations

• Increase required capital for mortgage exposures to strengthen through-the-cycle buffers.
• Implement measures "to increase risk-based differentiation in mortgage pricing."
• Policy goals:
  • "Improve mortgage risk-pricing."
  • "Limit procyclical effects induced by housing market corrections."

Metadata and identifiers

• Publication date: June 24, 2019
• Series: IMF Staff Country Reports
• Title repeated: Canada: Financial System Stability Assessment

Source: https://www.imf.org/en/publications/cr/issues/2019/06/24/canada-financial-system-stability-assessment-47024

Content in this bundle

• Canada Financial System Stability Assessment; IMF Country Report No. 19/177; June 2019
  • Canada Financial System Stability Assessment; IMF Country Report No. 19/177; June 2019 (Markdown version)
  • Canada Financial System Stability Assessment; IMF Country Report No. 19/177; June 2019 (PDF)