Bank of Canada. Image credit: Wikimedia Commons
Ottawa/CMEDIA: Canadian banks would be readily guarded from a global financial crisis by the Bank of Canada if the current banking crisis in the U.S. and Europe spills into Canada, but the central bank does not think it will have to step in.
Speaking at the National Bank Financial Services Conference on Wednesday, Toni Gravelle, Bank of Canada’s deputy governor made a declaration that the bank was “ready to act in the event of severe market-wide stress and provide liquidity support to the financial system,” with specific reference to the near-collapse of the British pension system last September following disruptive tax cuts by then-Prime Minister Liz Truss.
The Bank of Canada would be better prepared for such a crisis, said Gravelle, to offer liquidity not just to banks, but pension funds and others facing financial stress.
The central bank had learnt many lessons from the COVID-19 crisis, Gravelle said, and would do things more efficiently if a similar major crisis arose and markets stopped functioning.
A fresh discussion paper was released by the Central Bank informing how the Bank of Canada responded to “an unparalleled level of financial market disruption”when the pandemic virtually halted the entire Canadian economy.
“The Canadian banking sector is in a quite different place than the regional banks in the U.S. But just in terms of the current crisis, our current assessment, although we are keeping a close eye, we don’t feel anywhere close to being concerned in terms of financial system stress,” Gravelle was reported saying.
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