We employ a comprehensive data set and a variety of methods to provide evidence on the magnitude of large banks’ funding advantage in Canada, and on the extent to which market discipline exists across different securities issued by the Canadian banks. The banking sector in Canada provides a...

Two models of default risk are prominent in the financial literature: Merton's structural model and Altman's non-structural model. Merton's structural model has the benefit of being responsive, since the probabilities of default can continually be updated with the evolution of firms' asset...

The financial service industry has been undergoing significant change in recent years. This paper analyzes some key developments affecting the industry and examines some important issues facing the industry and its regulators. Changes discussed include the way services are provided, the...

A distinguishing feature of macro stress testing exercises is the use of macroeconomic models in scenario design and implementation. It is widely agreed that scenarios should be based on "rare but plausible" events that have either resulted in vulnerabilities in the past or could do so in the...

Stress testing, at its most general level, is an investigation of the performance of an entity under abnormal operating conditions. The authors focus on one set of entities--the Canadian banking sector--and investigate losses in the loans portfolio of this sector as a function of changing...

Default rates are series commonly used in stress testing. In Canada, as in many other countries, there are no historical series available for sectoral default rates on bank loans to firms. Knowledge of such data is required to assess the impact of shocks on the balance sheets of financial...

The recent crisis has underlined the importance of sound bank liquidity management. In response, regulators are devising new liquidity standards with the aim of making the financial system more stable and resilient. In this paper, the authors analyse the impact of liquid asset holdings on bank...

We investigate the relationship between immigrant status and mortgage delinquency in the United States. We find that after controlling for observables, newly arrived immigrants are likely to have a higher delinquency rate on mortgages than natives, while immigrants who have resided in the United...

The authors document leverage, capital and liquidity ratios of banks in Canada. These ratios are important indicators of different types of risk with respect to a bank’s balance-sheet management. Particular attention is given to the observations by different types of banks, including small...