Seeing some success in measures but cautious given uncertainty. Banks in good shape
The Bank of Canada releases its financial systems review:
- it's measures to address problems with market functioning and confidence show signs of succeeding
- many of the banks facilities and purchase programs are being used the last now then at inception
- continues to assess the impacts of its measures and can adjust the scale of programs as market conditions change
- many past recovery a possible policy support will need to be flexible and adapt as the situation evolves
- strong policies have put a floor under Canadian economy and laid a strong foundation for its recovery
- federal government support for households and firms is directly mitigating income losses
- demand effects are rooted in income losses and uncertainty about just how bad things could get
- risk of credit downgrades is intensifying refinancing risks, energy sector has most 3 for refinancing needs over the next 6 months
- energy sector's ability to secure refinancing will be particularly tested with low oil prices, sector will be helped by new credit program being developed
- following Covid 19 shock, riskier firms are finding it difficult to assess more fragile markets such as the US leverage loans market
- despite mortgage deferrals and added borrowing some households are likely to fall behind on their loan payments
- lower the income a shot glass the greater the risks of a rising consumer insolvencies
- what started as cash flow problems could develop into a solvency issue for some businesses
- financial system remains resilient but outlook for Canadian economic activity is highly uncertain
- Canada's 6 largest commercial banks are in good position to manage the consequences
- size of banks balance sheet has roughly tripled from C$119 billion on March 4 to C$392 billion on May 6
Gov. Poulos will speak at 10:30 AM ET on the financial system review, but overall the report seems to suggest there is some positives but risks from uncertainty remain. Banks are in good condition to withstand the storm.
