Yahoo Finance Watchdog flags housing market as top risk to Canada's financial system
The housing market has topped an annual list of the biggest risks to Canada’s financial system released by the country’s top banking regulator, which also flagged the potential for trouble in the non-bank financial sector to spill over to the broader system.
Risks tied to liquidity and funding as well as to commercial real estate, identified by many market observers as acutely vulnerable to rising interest rates, were also singled out in the Office of the Superintendent of Financial Institutions’ annual risk outlook for 2023-24.
“Given the rapidity at which interest rates globally have increased, the risk has grown that such an adjustment may not be completely smooth,” OSFI said.
The April 18 assessment noted that Canada’s financial system is resilient but highlighted “growth and uncertainty in unregulated non-bank financial” activity, which, it said, “may increase the likelihood of risk transmission to the broader financial system during periods of volatility and market decline.”
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Peter Routledge, OSFI’s Superintendent, said the annual risk report, the second of its kind, is intended to highlight “significant risks facing Canada’s financial system” and inform the public about the regulatory response to these risks.
The 2022 assessment highlighted risks including significant cyber attack and digital innovation and warned that rapidly rising interest rates would put pressure on retail, corporate and commercial borrowers in terms of their ability to service debt.
More to come …
