Deputy Governor Paul Beaudry speaks about the strength and resilience of the financial system throughout the COVID‑19 pandemic and economic recovery. He also outlines key vulnerabilities and risks going forward.

Watch Deputy Governor Beaudry speak to the Ontario Securities Commission by webcast. Read the full speech.

The system fared well through the pandemic

The Canadian financial system was in a solid position at the outset of the pandemic and has been resilient throughout the crisis. This is thanks to:

• Canada’s strong regulatory and supervisory framework
• well-capitalized financial institutions
• unprecedented policy support from governments and the Bank of Canada

As a result, household insolvencies are at multi-year lows, and few businesses are showing signs of major financial stress.

But the main vulnerabilities remain significant

The financial vulnerabilities that existed before the pandemic still exist. That’s why we’re keeping an eye on the financial health of households, businesses and financial institutions as the recovery progresses.

Housing market imbalances

The price of houses rose sharply throughout the pandemic. After some moderation it has picked up again, but we’re closely monitoring the risks that come with this shift. If house prices drop again quickly, this could delay household spending.

High levels of household debt

During the pandemic, some households were able to save more. This is partly because there were:

• limited opportunities to spend during lockdowns
• unprecedented government supports

At the same time, household debt climbed as more people took out mortgages, and those mortgages were bigger on average. Financially stretched households have little breathing room to manage any disruption to their income or a rise in the cost of servicing their debt.

Climate change

Climate change and its effects have clearly accelerated. The floods in British Columbia are a devastating example of the risks extreme weather events pose to homes, businesses and other assets. Climate-related risks also include those that come from transitioning to a low-carbon economy.

We’ve been collaborating with partners from all over the world to better analyze and assess the climate-related risks to our financial system.

We will continue to monitor vulnerabilities

The Bank keeps its finger on the pulse of the Canadian economy in a variety of ways, including the results of the Financial System Survey of financial industry experts. Among respondents in this autumn’s survey, 97 percent said they are fairly confident that the financial system could withstand a large shock and remain resilient.