Household credit makes up about 60 per cent of the Canadian banking sector's total loan exposure, so losses on household lending would likely have an immediate impact on capital adequacy and forward profitability. The household sector could be an important channel through which global economic weakness affects the Canadian financial sector more widely.
While the Canadian household sector remains relatively healthy, its resilience will be tested during the recession. Various indicators of financial stress, such as bankruptcies and loans in  7  See "Recent Proposals for Procyclical Capital Requirements", Financial System Review (Ottawa: Bank of Canada, December 2008): 15. BIS Review 160/2008  5  arrears, have increased recently from historically low levels.