In a speech to financial services professionals in Montreal, Gravelle said the central bank’s quantitative tightening programme will have run its course by the first half of 2025. — Bloomberg
MONTREAL: The Bank of Canada (BoC) is ready to step in with support if the banking system comes under severe strain, but now it is not even close to being worried about the health of the financial system, deputy governor Toni Gravelle says.
In a speech to financial services professionals in Montreal, Gravelle also said the central bank’s quantitative tightening programme will have run its course by the first half of 2025.
The failures of US lenders Silicon Valley Bank and Signature Bank, followed by Credit Suisse’s rescue, are prompting central bankers to closely monitor the potential for banking stress to trigger a credit crunch.
“The bank’s mandate to promote the stability of the financial system means that we’re ready to act in the event of severe market-wide stress and provide liquidity support to the financial system,” Gravelle said.
This is the first time the BoC has commented on the banking turmoil in the United States and Europe.
After the speech, Gravelle responded to a question about the health of Canada’s banking system, saying: “We don’t feel we’re anywhere close to being concerned in terms of financial system stress.”
Gravelle pointed to the 2008-2009 financial crisis and the outset of the Covid-19 pandemic as examples of where the bank had intervened in the past.
But there were also lessons taken that would be addressed in the future, he said.
“If we need to step in again, we will – as we always do – have an eye to mitigating moral hazard,” Gravelle said.
Moral hazard is when investors feel they can take unusual risks without bearing the consequences if things go wrong. — Reuters
