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Understanding Systemic Risks in the Canadian Financial System

Author

Listed:
  • Gabriel Bruneau
  • Sascha Clazie-Thomson
  • Thibaut Duprey
  • Ruben Hipp
  • Javier Ojea Ferreiro
  • Kerem Tuzcuoglu

Abstract

This paper reviews recent efforts to monitor and assess systemic risk in the Canadian financial system and outlines a framework for future system-wide stress testing. We examine how perceived and actual interconnections—across banks and non-bank financial institutions, domestic and foreign entities, and institutions of different sizes—shape the propagation of financial stress. We then review advances in system-wide stress-testing approaches, including agent-based and equilibrium-based models that capture downside amplification mechanisms and macro-financial feedback. Finally, the paper presents a blueprint for a Canadian system-wide stress-testing and reverse stress-testing toolkit designed to support the assessment of financial system resilience.

Suggested Citation

  • Gabriel Bruneau & Sascha Clazie-Thomson & Thibaut Duprey & Ruben Hipp & Javier Ojea Ferreiro & Kerem Tuzcuoglu, 2026. "Understanding Systemic Risks in the Canadian Financial System," Staff Analytical Papers 2026-28, Bank of Canada.
    • Handle: RePEc:bca:bocsap:26-28
    DOI: 10.34989/sap-2026-28
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    Keywords

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    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • 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
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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