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Bank of Canada Financial System Review

June 11, 2018

Eric de Roos, Policy Analyst, Financial Sector, Canadian Credit Union Association

The Bank of Canada released its semi-annual Financial System Review last week. Front-and-centre in the Review is the Bank’s assessment of the impact that increased interest rates and stricter mortgage requirements has had on the economy. Further, the Review highlights the risk that high debt levels pose to the financial system.

With respect to the housing market, the Review notes that the rise of income combined with the slowing of household credit growth is lessening the “vulnerability associated with housing market imbalances.” Concerning the levels of household debt, the report views the slowing a credit growth as a positive indicator, however, the sheer size of debt stock means that this vulnerability will exist for a longer period.

Credit unions are mentioned in the Review in the context of the recent B20 mortgage guidelines. The Review states that “it is too early to assess the full effects of [B20] on new lending, including the volume of credit activity migrating to credit unions.” As well, it’s noted that some credit unions are voluntarily adopting stress tests similar to the B20 Guidelines.

Finally, cybersecurity is highlighted as the third vulnerability to the financial system. The Bank reiterated the importance of cooperation within the Canadian financial sector to increase the resilience of the system to respond to a cyber attack. Read More.