By Kim Mackrael


OTTAWA--Government and central bank policies such as emergency income support and financial market interventions have so far kept the pandemic-induced downturn from creating broad stress across the country's financial system, a senior Bank of Canada official said.

Deputy Governor Toni Gravelle said in prepared remarks for a speech on Monday that the central bank has long warned that a recession might create stress across the financial system, given Canadians' high household debt levels and imbalances in some housing markets.

"The main reason it hasn't come to pass is the unprecedented policy response to the pandemic," he said.

Mr. Gravelle cited government programs such as income and wage supports, and the central bank's decision to intervene in some markets to restore and maintain their function, as policies that helped prevent widespread financial system stress. Canada's financial institutions were well-capitalized before the pandemic began, allowing them to be flexible about debt repayments, he added.

In his speech, Mr. Gravelle said about 14% of homeowners with mortgages, and 10% of renters, have asked for deferrals on some form of debt repayment since the pandemic began. By the end of September about 60% of all deferrals had expired, with the vast majority of borrowers resuming payments.

"So far, the risk of a wave of consumer defaults seems low," Mr. Gravelle said.

Still, he added that many mortgage deferrals only ended in October, and it may take until early next year to see how many households are falling behind.

When it comes to businesses, Mr. Gravelle said wage and rent subsidies have helped many businesses stay afloat over the short term, and business insolvency filings are below their prepandemic levels.


Write to Kim Mackrael at


(END) Dow Jones Newswires

November 23, 2020 14:15 ET (19:15 GMT)

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