Canadian collateral can withstand crisis-level systemic risk – BoC paper

Canadian collateral holdings can comfortably withstand crisis-level systemic risk, a paper published by the Bank of Canada finds.

In the paper, Radoslav Raykov explores the adequacy of collateral requirements in protecting against systemic risk in the Canadian futures market during the 2008 financial crisis. The results suggest current levels should be adequate.

The author finds, however, because the requirements allow for a large margin for error, they create “unequal buffering” across firms