Sovereign Defaults Are at Record High

Good afternoon. Thank you for inviting me to talk about some of the actions the Bank of Canada took at the outset of the COVID-19 pandemic to keep markets liquid and functioning. That’s what you’ve been promised, and it’s what I plan to do today. But I would be remiss in a speech about market liquidity if I didn’t speak first about recent turmoil in the banking system in the United States and overseas. So let me start with a few words from our perspective. In the United States, the collapse of Silicon Valley Bank and Signature Bank on the same weekend revealed how the combination of a large and concentrated uninsured depositor base and falling asset values can lead to bank runs. US authorities have responded by taking control of both banks and offering extraordinary support to their depositors. And the Federal Reserve stepped in with a new term funding facility for banks requiring liquidity support. Shortly thereafter, Credit Suisse came under severe market pressure, and the Swiss authorities facilitated its takeover by UBS, ensuring continuity of operations for Credit Suisse’s clients and financial counterparties. While these events introduced some degree of stress in the financial system, markets are functioning. Global banks are more resilient today than they were 15 years ago, at the outset of the global financial crisis. With the reforms put in place since then, global banks are required to have substantially increased their capital and liquidity buffers, making the system safer and better able to withstand stress. tweet at 12:39pm: BOC’S GRAVELLE: SUPPORT CANADIAN FINANCIAL SYSTEM IF MARKETS FACE SEVERE, WIDESPREAD STRESS ’ #BoC #Gravelle #Canada tweet at 12:39pm: BOC’S GRAVELLE: CANADA COULD STILL BE AFFECTED BY EVENTS ABROAD AS GLOBAL ECONOMY IS INTERCONNECTED ’ #BoC #Gravelle #Canada tweet at 12:37pm: BANK OF CANADA DEPUTY GOVERNOR GRAVELLE: CANADA’S FINANCIAL SYSTEM ‘WELL REGULATED AND SUPERVISED, WITH SOUND RISK MANAGEMENT’ #BoC #Gravelle #Canada tweet at 12:49pm: BOC’ GRAVELLE: IF FACED W/ANOTHER EXTREME EVENT THAT CAUSED SEVERE DYSFUNCTION IN GOC BOND MARKET, WE MAY RESORT TO LARGE-SCALE GOC BOND PURCHASES ’ #BoC #Gravelle #Canada

tweet at 3:06pm: BANK OF ENGLAND'S CATHERINE MANN AT NABE: BANK COLLAPSES WERE NOT A MONETARY POLICY ISSUE #bankofengland #ukeconomy #catherinemann #monetarypolicy #inflation #interestrates #nabe2023 tweet at 3:07pm: MORE BOE'S MANN: IT WAS 'VERY CLEAR TO ME WHICH WAY TO GO' WHEN VOTING FOR 25BP RATE HIKE AT LAST MPC MEETING #bankofengland #ukeconomy #catherinemann #monetarypolicy #inflation #interestrates #nabe2023 tweet at 3:10pm: BOE'S MANN: CREDIT CONDITIONS ARE A PART OF OUR RATE DECISIONS. tweet at 3:11pm: MORE BOE'S MANN: 'THERE IS A DIFFERENCE BETWEEN TIGHTENING' POLICY AND CONDITIONS 'BEING TIGHT' #bankofengland #ukeconomy #catherinemann #monetarypolicy #inflation #interestrates #nabe2023 tweet at 3:12pm: BOE'S MANN: LOWER INFLATION EXPECTATIONS SUPPORTED A SMALLER INCREASE.