For example, 𝜖𝜖𝑡𝑡 may be thought of as an event outside of Canada that leads to a repricing of longer-term mortgage rates. In general, 𝜖𝜖𝑡𝑡 should not be thought of as a mean zero random variable. In fact, it is often best to think of 𝜖𝜖𝑡𝑡 as a random variable that only takes on non-negative values.
Tougher supervision does not mean that there will never be another bank failure. It is neither our task nor our objective to prevent each and every bank from exiting the market. Banks can and should exit the market if they are managed in a risky and unsound manner, or if they are structurally incapable of maintaining their competitiveness based on a sound business model.