Risk of shock to financial system down, but concerns linger: Bank of Canada survey

Risk management experts believe the likelihood of a shock that could impair the Canadian financial system has decreased since last year, but concern remains around geopolitical tensions, high inflation, unemployment and household debt burdens.

The Bank of Canada’s 2023 Financial System Survey shows that confidence in the resilience of the Canadian financial system is at its highest level since the central bank’s first such survey in 2018.

Experts cite a well-capitalized banking sector and well-regulated financial system, saying they expect regulators, central banks and governments would intervene in the event of a significant shock.

Respondents who believe the likelihood of a shock is greater in the next one to three years say they are concerned that high inflation could linger and quantitative tightening could lead to deteriorated market liquidity.

They say a successful cyber attack on a Canadian financial institution or major financial market infrastructure could result in system-wide disruptions, while geopolitical tensions could weigh on the pricing of risk assets globally.

The survey was completed by 58 senior experts in risk management between Feb. 21 and March 10. The U.S. regional banking crisis began with Silicon Valley Bank’s collapse on March 10.

The Canadian Press

The Canadian Press is a national news agency headquartered in Toronto and founded in 1917.