Understanding Systemic Risks in the Canadian Financial System

Gabriel Bruneau, Sascha Clazie-Thomson, Thibaut Duprey, Ruben Hipp, Javier Ojea Ferreiro and Kerem Tuzcuoglu

No 2026-28, Staff Analytical Papers from Bank of Canada

Abstract: This paper reviews recent efforts to monitor and assess systemic risk in the Canadian financial system and outlines a framework for future system-wide stress testing. We examine how perceived and actual interconnections—across banks and non-bank financial institutions, domestic and foreign entities, and institutions of different sizes—shape the propagation of financial stress. We then review advances in system-wide stress-testing approaches, including agent-based and equilibrium-based models that capture downside amplification mechanisms and macro-financial feedback. Finally, the paper presents a blueprint for a Canadian system-wide stress-testing and reverse stress-testing toolkit designed to support the assessment of financial system resilience.

Keywords: Financial system; Financial stability and systemic risk (search for similar items in EconPapers)
JEL-codes: G01 G17 G18 G21 G23 G28 (search for similar items in EconPapers)
Date: 2026-06
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Persistent link: https://EconPapers.repec.org/RePEc:bca:bocsap:26-28

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