Bank of Canada watching for potential spillovers from global banking stresses
MONTREAL –
A senior Bank of Canada official says the central financial institution is protecting a detailed eye on the stresses to the worldwide banking system forward of its subsequent rate of interest choice and financial coverage report in April.
In a speech to the National Bank monetary providers convention, Bank of Canada deputy governor Toni Gravelle mentioned Wednesday the financial institution is anticipating any additional results from the latest banking issues within the U.S. and Europe.
“We will consider the macroeconomic impact of this evolving situation as we put together our next projection,” Gravelle mentioned.
“We’ll be looking specifically at potential spillovers into the real economy to the extent that financial conditions tighten and there are broader confidence effects.”
U.S. regulators needed to take management of Silicon Valley Bank in addition to Signature Bank earlier this month to stop wider monetary issues amid a run on deposits, whereas Swiss authorities helped UBS to accumulate Credit Suisse after its rival bumped into difficulties.
Gravelle mentioned international banks are extra resilient at present than they had been 15 years in the past, on the outset of the worldwide monetary disaster.
“With the reforms put in place since then, global banks are required to have substantially increased their capital and liquidity buffers, making the system safer and better able to withstand stress,” he mentioned.
Gravelle mentioned whereas the Canadian banking system has a world repute for stability, it isn’t proof against occasions taking place elsewhere and that monetary stresses that come up exterior of Canada can negatively have an effect on issues right here.
He mentioned the Bank of Canada is able to act within the occasion of extreme market-wide stress and supply liquidity help to the monetary system.
The Bank of Canada’s subsequent rate of interest choice and financial coverage report is ready for April 12.
The central financial institution stored its key coverage price on maintain at 4.50 per cent at its rate of interest choice on March 8. It was the primary time the Bank of Canada didn’t increase charges because it started mountain climbing them final yr in an effort to convey inflation beneath management.
This report by The Canadian Press was first printed March 29, 2023.
