BoC: Commerce conflict with US threatens Canadian financial system and poses dangers to monetary stability

In its annual Monetary Stability Report, the Financial institution of Canada mentioned the commerce conflict with america threatens the Canadian financial system and poses dangers to monetary stability, per Reuters.

Key takeaways

“In excessive circumstances, market volatility might flip into market dysfunction.”

“Canada’s monetary system is resilient; banks are properly positioned to deal with a interval of stress.”

“Important near-term concern is the chance of a disorderly market sell-off; in excessive disaster, authorities may need to supply liquidity.”

“Extreme and long-lasting world commerce conflict might push charge of mortgage arrears past ranges seen in 2008-09.”

“If family and enterprise credit score defaults had been to happen on a big scale, banks might see larger losses than they’ve provisioned for.”

“In a interval of stress, hedge funds might discover it more durable to keep up their presence in authorities of Canada markets.”

“BoC is much less involved about impression of excessive borrowing prices on debt serviceability than it was a 12 months in the past.”

“Greater than 90% of mortgage holders with 5-year mounted charge mortgages ought to be capable of make larger funds.”

“Credit score losses may lead banks to cut back lending and this might exacerbate an financial downturn.”

“Additionally watching availability of credit score and circumstances for funding and market liquidity.”

“Will intently watch indicators of monetary stress and proof of precautionary habits by monetary system contributors.”

Market response

USD/CAD confirmed no speedy response to this publication and was final seen gaining 0.25% on the day at 1.3872.