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Regulatory Changes and Financial Structure: The Case of Canada

Christian Calmès ()

Staff Working Papers from Bank of Canada

Abstract: The author documents some stylized facts about the Canadian financial structure. He explores these empirical facts in the context of Canadian financial legislation and finds that, over the 1990s, Canadian businesses became more heavily dependent on financial markets as their primary source of external funding. Data display a trend towards a more "market-oriented" financial system. The analysis suggests that this new trend started after the 1980 amendments to banking legislation and was considerably accentuated after the 1992 amendments. The author constructs a new series for the off-balance-sheet activities of Canadian banks that converts the non-interest income of banks into a credit equivalent. Combined with other evidence, this credit-equivalent series suggests a healthy growth trend in banking activity. Financial institutions are broadening their business lines and participating more actively in the arrangement of market financing. Regarding direct finance, the data indicate that Canadian firms issue a substantial share of their bonds in the U.S. bond market, and an increasing share of their stocks in the U.S. stock market. The author conjectures that there is some form of incompleteness in the Canadian markets. A noticeable fraction of Canadian issuances in the United States involves riskier firms for which U.S. markets seem more mature.

Keywords: Financial institutions; Financial services; Recent economic and financial developments (search for similar items in EconPapers)
JEL-codes: G20 G21 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2004
New Economics Papers: this item is included in nep-cfn, nep-pke and nep-reg
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