What repercussions will this have on the transmission channels of monetary policy and, by extension, on the effectiveness of monetary policy? Above all, the fiercer competition in the financial markets and the increasing blurring of boundaries between money and other financial assets, and between banks and non-banks will reduce individual institutions’ scope to set their own interest rates.
Canada's conservative banking culture clearly helped our institutions avoid some the most egregious lending practices seen elsewhere. So, too, has the nature of securitization in Canada. Only about 20 per cent of Canadian mortgages are securitized. With more of this lending remaining on balance sheets, underwriting standards have remained high.