BOCs financial stability report: Debt, asset valuations are key risks to stability

Bank of Canada financial stability report:

• Debt serviceability and asset valuations are key risks to stability
• valuations of some financial assets appear to have become stretched, which increases risk of a sharp correction.
• System appears resilient, over the last year financial system participants have continued to proactively adjust to higher rates.
• Price corrections could be large and abrupt if there are significant changes to expectations around the path of rates or to the economic outlook.
• Stretched asset valuations may not properly reflect the risks to economic outlook, thereby boosting likelihood of this orderly price correction.
• Valuations remain under pressure in parts of commercial real estate sector, not all asset managers have fully reflected these reduced evaluations on their balance sheets.
• Smaller mortgage lenders have seen a sharp uptick in credit arrears.
• Signs of financial stress at risk primarily among households without a mortgage.
• Largest entities of financial system appeared to have generally limited exposure to commercial real estate.
• Global markets have continued to function well but uncertainty remains elevated.

From the OCs Macklem:

• Canada’s financial system remains resilient

…more

This article was written by Greg Michalowski at www.forexlive.com.