- BoC's Financial Systems Review: BoC's facilities and purchase programs to address problems with market functioning and confidence are showing signs of succeeding
Market news
14 May 2020
BoC's Financial Systems Review: BoC's facilities and purchase programs to address problems with market functioning and confidence are showing signs of succeeding
- Access to liquidity has greatly improved in key financial markets that had been showing signs of significant stress
- Many of the programs are now being used less than they were at inception
- We will continue to assess the impacts of these measures and can adjust scale of these programs as market conditions change
- Canada's key financial institutions are strong enough to deal with challenging conditions, including operational disruptions
- Canada's six largest banks have strong capital and liquidity buffers, diversified assets and protection of a robust mortgage insurance system
- Many paths to the recovery are possible; policy support will need to be flexible and adapt as the situation evolves
- Demand effects are rooted in income losses and uncertainty about just how bad things could get
- Fall in incomes and asset values and the rise in uncertainty about their future paths make lending to households and businesses riskier for banks and non-bank financial intermediaries
- Strong policies have put a floor under economy and laid a strong foundation for its recovery
- Government support for households and firms is directly mitigating income losses
- Risk of credit downgrades is intensifying refinancing risks; energy sector has the most refinancing needs over the next six months ($6 billion) and faces the most potential downgrades
- Following the COVID‑19 shock, riskier firms are finding it difficult to access these markets, partly due to shift in investor sentiment
- Despite deferrals and added borrowing, some households are likely to fall behind on their loan payments
- The longer the income shock lasts, the greater risk of rise in consumer insolvencies; flexible policy support can adapt as the situation evolves
- What started as cash flow problem could develop into solvency issue for some businesses; this becomes more likely if loss in revenues extends over long period
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