The extreme market stresses at the outset of the COVID-19 pandemic showed that the financial system is vulnerable to sudden spikes in demand for market liquidity. The third area the Bank is watching closely is the ability of Canadian households to service their debt at higher interest rates.
The changes we feel to be insignificant can now grow manifold in a very short span of time posing threat to the stability of financial system. Therefore, we have to be cognisant of all the financial changes happening around and respond appropriately to such changes. As the regulatory perimeter gradually extends to uncharted domains – climate finance, regulation of digital lending, etc.