Overview
- The Bank of Canada said Thursday that Canada’s financial system is well positioned to weather shocks but that specific vulnerabilities have increased in parts of the system.
- The central bank singled out high stock and corporate debt valuations as a source of risk because a sharp repricing could force asset managers to sell holdings and raise urgent demand for cash.
- Non-bank financial intermediaries are taking on more leverage to buy government bonds, which supports liquidity in calm times but could amplify stress and destabilize short‑term funding markets if conditions worsen.
- Household mortgage‑renewal pressure remains concentrated with final waves of higher‑rate renewals expected to pass by the second half of 2027 while overall arrears have stabilized.
- The BoC warned that external shocks — including trade tensions, the Middle East war and oil shocks — together with emerging AI and cyber risks could trigger a cascade of market stress and wider economic fallout.