{
  "title": "Canada: Financial Sector Assessment Program-Technical Note-Stress Testing and Financial Stability Analysis",
  "publication": "IMF Staff Country Reports, January 24, 2020",
  "sourceUrl": "https://www.imf.org/en/publications/cr/issues/2020/01/23/canada-financial-sector-assessment-program-technical-note-stress-testing-and-financial-48970",
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  "summary": "This paper on Financial Safety Net and Crisis Management for the Canada reviews the stress testing and financial stability analysis. The paper highlights that the financial system’s performance has been strong.",
  "sections": [
    {
      "heading": "Overview and purpose",
      "content": "- Reviews stress testing and financial stability analysis for Canada.\n- Highlights that the financial system’s performance has been strong.\n- Notes strong financial linkages with the United States.\n- Identifies macrofinancial vulnerabilities—“notably, elevated household indebtedness and housing market imbalances”—as substantial financial stability concerns."
    },
    {
      "heading": "Key findings from stress testing and sector analysis",
      "content": "- The insurance sector has remained financially sound even in the low interest rate environment.\n- Major banks, life insurers, and pension funds have expanded their footprints abroad.\n- Major deposit-taking institutions would be able to manage severe macrofinancial shocks.\n- Mortgage insurers would probably need additional capital.\n- Major deposit-taking institutions hold enough liquidity buffers to withstand sizeable funding outflows."
    },
    {
      "heading": "Risks and vulnerabilities requiring attention",
      "content": "- Increased balance sheet complexity.\n- Reliance on wholesale and foreign exchange funding.\n- Extensive use of derivatives.\n- These areas “would warrant closer monitoring by the competent authorities and a more comprehensive quality assurance in the context of supervisory or macroprudential stress testing exercise.”"
    },
    {
      "heading": "Policy implications and recommended supervisory actions (as stated)",
      "content": "- Closer monitoring by competent authorities of:\n  - balance sheet complexity;\n  - reliance on wholesale and foreign exchange funding;\n  - extensive use of derivatives.\n- More comprehensive quality assurance in supervisory or macroprudential stress testing exercises to address the identified concerns.\n- Recognition that mortgage insurers would likely need additional capital under severe macrofinancial shocks.\n\n---\n\n Content in this bundle\n\n- 1canea2020001\n  - 1canea2020001 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - 1canea2020001 (PDF){rel=\"external\" type=\"application/pdf\"}"
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    "Published: January 24, 2020",
    "Series: IMF Staff Country Reports",
    "DOI: https://doi.org/10.5089/9781513527116.002",
    "Reviews stress testing and financial stability analysis for Canada.",
    "Highlights that the financial system’s performance has been strong.",
    "Notes strong financial linkages with the United States.",
    "Identifies macrofinancial vulnerabilities—“notably, elevated household indebtedness and housing market imbalances”—as substantial financial stability concerns.",
    "The insurance sector has remained financially sound even in the low interest rate environment.",
    "Major banks, life insurers, and pension funds have expanded their footprints abroad.",
    "Major deposit-taking institutions would be able to manage severe macrofinancial shocks.",
    "Mortgage insurers would probably need additional capital.",
    "Major deposit-taking institutions hold enough liquidity buffers to withstand sizeable funding outflows.",
    "Increased balance sheet complexity.",
    "Reliance on wholesale and foreign exchange funding.",
    "Extensive use of derivatives.",
    "These areas “would warrant closer monitoring by the competent authorities and a more comprehensive quality assurance in the context of supervisory or macroprudential stress testing exercise.”",
    "Closer monitoring by competent authorities of:",
    "More comprehensive quality assurance in supervisory or macroprudential stress testing exercises to address the identified concerns.",
    "Recognition that mortgage insurers would likely need additional capital under severe macrofinancial shocks.",
    "**1canea2020001**"
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