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Tail market linkage between Canadian banks and non-bank financial intermediaries

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  • Ojea-Ferreiro, Javier

Abstract

This paper analyzes market-based connections between Canadian banks and non-bank financial institutions during periods of stress. Using weekly equity data from 1990–2024, I find an increase in the perceived interconnections between Canadian banks and NBFIs in the period leading up to the COVID-19 pandemic and stabilized after. After policy measures were taken to control the liquidity issue of Home Trust during 2017, the systemic risk spillovers from mortgage firms to the banking sector decreased. Tail dependence with NBFIs is stronger for larger banks, emphasizing their central role in the financial system. Overall, the findings highlight the growing importance of the bank–NBFI nexus for financial stability monitoring and the usefulness of market‑based tail risk measures for tracking systemic vulnerabilities in real time.

Suggested Citation

  • Ojea-Ferreiro, Javier, 2026. "Tail market linkage between Canadian banks and non-bank financial intermediaries," Finance Research Letters, Elsevier, vol. 97(C).
    • Handle: RePEc:eee:finlet:v:97:y:2026:i:c:s1544612326003508
    DOI: 10.1016/j.frl.2026.109820
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    Keywords

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    JEL classification:

    • C - Mathematical and Quantitative Methods
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G - Financial Economics
    • G0 - Financial Economics - - General
    • G01 - Financial Economics - - General - - - Financial Crises
    • G2 - Financial Economics - - Financial Institutions and Services
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G3 - Financial Economics - - Corporate Finance and Governance
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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