Canadian Government, Central Bank Helped Avoid Broad Financial System Stress -- Bank of Canada Official
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
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
"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
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.
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
Write to Kim Mackrael at firstname.lastname@example.org
(END) Dow Jones Newswires
November 23, 2020 14:15 ET (19:15 GMT)
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