The Bank of Canada announced some proposals that are aimed at protecting the country’s financial system in the event of another financial crisis.
The Bank of Canada announced some proposals that are aimed at protecting the country’s financial system in the event of another financial crisis. The bank’s deputy governor Carolyn Wilkins announced the plans Tuesday which it hopes will reduce the risk to financial institutions and cut taxpayers’ exposure. The BoC wants to ensure that all banks and mortgage lenders have ‘living wills’ to avoid a meltdown and without such plans they would be ineligible for a state bailout. Mortgages may also be accepted as collateral against emergency loans for financial institutions. Ms. Wilkins stated: “We are adjusting the range of collateral we would accept as a last resort for emergency loans. This collateral could include mortgages, which would give a stressed institution more capacity to accept ELA in an emergency. To be clear, this would only occur after all other collateral had been exhausted.”
