Financial, economic conditions top industry worries

Financial industry firms are worried about high household debt levels, the economy and geopolitics, and less concerned about the transition to new financial benchmarks and the move to T+1, according to a survey by the Canadian Securities Administrators (CSA).

The regulators released a high-level summary of the results of a survey of almost 500 portfolio managers and investment dealers, carried out between Oct. 16 and Nov. 7, on their assessment of the looming risks to the financial system.

“Overall, respondents indicated that they were somewhat more concerned than in the previous year,” the CSA said. It noted that only 1% of respondents said their concerns have eased compared with last year, while 37% indicated that their level of concern had increased, and 61% said it was unchanged.

Approximately 65% of respondents reported they are “somewhat” to “very” concerned about the stability of the financial system, which represents an increase of about three percentage points from a year ago, the CSA said.

The biggest sources of concern were household debt, high interest rates, the housing market, the geopolitical environment and cyber vulnerabilities, the report said.

In particular, over 75% of respondents said household debt posed a “high” or “very high” risk to financial stability.

Respondents were relatively relaxed about the risks posed by the transition of interest rate benchmarks (from CDOR to CORRA) in the credit and derivatives markets, and the planned reduction of the settlement cycle from two trading days to one (T+1).

Stan Magidson, chair of the CSA and chair and CEO of the Alberta Securities Commission, said the survey provided regulators “with important and reliable information on new and existing risks to financial stability.”

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.