For continued economic growth and growing living standards, a stable and efficient financial system is required. Canada’s banks have continuously been recognized among the safest in the world by the World Economic Forum. Canada’s conservative banks, paired with solid regulation and oversight, serve as an example of financial stability across the globe.
By managing a stable and efficient financial system, which includes banks and credit unions, financial markets, and clearing and settlement systems, the Bank of Canada promotes Canada’s economic and financial well-being. The bank accomplishes this in the following ways:
- delivering central banking services, such as liquidity and lender-of-last-resort services;
- supervising and resolving crucial financial market infrastructures;
- conducting and publishing research and analyses; and
- assisting in the development and implementation of policy.
Federal Regulation: Canadian Financial System
Canada’s banks were well funded, managed, and regulated during the global financial crisis, and they remain so now. No Canadian bank was in jeopardy of failing or requiring government assistance. The Canadian economy has been able to mitigate the effects of the recent financial crisis thanks to little exposure to the US market and a government management liability that has facilitated medium and long-term credit access . Thanks to a solid system of inspections and oversight, the Canadian financial system had enhanced its management processes following the crises of the 1980s and 1990s, recapitalizing sectors relevant to the real economy. In a recent review of Canada’s financial system, the IMF determined that it is exceptionally mature, sophisticated, and well-managed.
Below given are the four major financial structures.
Financial System: Provision of Liquidity
The Bank of Canada is the financial system’s final source of liquid funds and serves as its “lender of last resort.” The bank’s strategy for market operations and liquidity provision guides the deployment of its routine and emergency liquidity measures.
Financial Market Infrastructures : Oversight and Resolution
Under the authority of Canada’s Payment Clearing and Settlement Act, the bank regulates and functions as the resolution authority for a number of financial market infrastructures (FMIs). Systemically essential payment systems, as well as clearing and settlement systems, are among them. For oversight, the Bank of Canada’s Risk-Management Standards for Designated FMIs are used.
Financial Stability: Assessment
Staff at the bank perform analysis and research to detect and reduce systemic risks that could jeopardize the financial system’s operation. The Financial System Review publishes the results once a year.
Financial System Committees
To achieve its financial system aims, the Bank of Canada works with federal, provincial, and international authorities and industry.