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Senate Banking Committee Hearing on Systemic Risk

October 31, 2018

Jessica Brandon-Jepp, Advocacy and Government Relations Advisor, Canadian Credit Union Association

The Standing Senate Committee on Banking, Trade and Commerce met on October 24 and 25, 2018 to examine and report on issues pertaining to the management of systemic risk in the financial system, domestically and internationally. Witnesses included:

October 24

  • Kent Andrews, Senior Vice President, Regulatory Risk and Risk Capital Assessment (TD Bank Group)
  • Antoine Avril, Vice President, Risk, Credit Granting and Special Loans(Desjardins Group)
  • Jason Drysdale, Executive Vice President, Retail and Commercial Risk(Royal Bank of Canada)
  • Darren Hannah, Vice President, Finance, Risk and Prudential Policy(Canadian Bankers Association)
October 25
  • Leah Anderson, Assistant Deputy Minister, Financial Sector Policy Branch (Department of Finance Canada)
  • Dean Cosman, President and Chief Executive Officer (Canada Deposit Insurance Corporation)
  • Steven Mennill, Chief Risk Officer (Canada Mortgage and Housing Corporation)
  • Ron Morrow, Advisor to the Governor (Bank of Canada)
  • Jeremy Rudin, Superintendent (Office of the Superintendent of Financial Institutions Canada)
Testimony from the first and second meetings centered around the merits of Canada’s principles-based regulatory regime and strength and skill of the Canadian banking system. Mention was made of the need to maintain a balanced approached to liquidity requirements to ensure banks are not deterred from making loans and that risk does not migrate to the unregulated shadow banking sector. Significant attention was paid to the impact of non-financial risk factors such as catastrophic natural disasters and cyber threats. Mention of the impact of trade related risk was mentioned as was the positive impact of central clearing on the contagion risk. Several questions were related to mortgage risk and the impact of rising interest rates.

The Bank of Canada mentioned that it has revised its Emergency Lending Assistance, or ELA, policy to clarify the role that ELA can play as a temporary source of liquidity to support the recovery or resolution of eligible financial institutions and FMIs. At the same time, the bank expanded the list of the eligible collateral for ELA loans to include mortgages, significantly increasing the capacity of eligible institutions to borrow under ELA. Finally, the bank provided greater clarity for the eligibility criteria and conditions under which FMIs and provincially regulated deposit-taking institutions can access ELA.
For more details on these meetings, including recordings, please click here.