The likelihood of a shock that could harm Canada’s financial system has declined since last year, but concerns remain about geopolitical tensions, high inflation, unemployment and household debt burdens, experts say in risk management surveyed by the Bank of Canada.
The 2023 edition of the central bank’s financial system survey shows that confidence in the resilience of Canada’s financial system is at its highest level since the central bank’s first survey of its kind, in 2018.
Experts point to a well-capitalized banking sector and a well-regulated financial system, saying they expect regulators, central banks and governments to intervene in the event of a large shock.
Those who think the likelihood of a shock is greater in the next one to three years are concerned that high inflation could persist and quantitative tightening could cause market liquidity to deteriorate.
According to them, a successful cyberattack on a Canadian financial institution or major financial market infrastructure could lead to system-wide disruptions, while geopolitical tensions could weigh on the pricing of risky assets globally.
The survey was completed by 58 senior risk management experts between February 21 and March 10.
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