The double-name principle might reduce the probability of defaults, but taking a firm’s debt as collateral is not sufficient if the firm’s creditworthiness is bolstered by the support of the commercial bank to which the Bank of Japan is lending. Nor is it desirable for the Bank’s assets and collateral to be concentrated in the liabilities of firms in a particular industry.
What we see is that, even as the average household is in better financial shape, more Canadians have stretched to buy a house during the pandemic. And these households are more exposed to higher interest rates and the potential for housing prices to decline. Two-thirds of Canadians are homeowners. Just under half own their home outright, and the rest have a mortgage.