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Regulatory Changes and Financial Structure: The Case of Canada

Author

Listed:
  • Christian Calmès
Abstract
The author documents some stylized facts about the Canadian financial structure. He explores these empirical facts in the context of Canadian financial legislation and finds that, over the 1990s, Canadian businesses became more heavily dependent on financial markets as their primary source of external funding. Data display a trend towards a more "market-oriented" financial system. The analysis suggests that this new trend started after the 1980 amendments to banking legislation and was considerably accentuated after the 1992 amendments. The author constructs a new series for the off-balance-sheet activities of Canadian banks that converts the non-interest income of banks into a credit equivalent. Combined with other evidence, this credit-equivalent series suggests a healthy growth trend in banking activity. Financial institutions are broadening their business lines and participating more actively in the arrangement of market financing. Regarding direct finance, the data indicate that Canadian firms issue a substantial share of their bonds in the U.S. bond market, and an increasing share of their stocks in the U.S. stock market. The author conjectures that there is some form of incompleteness in the Canadian markets. A noticeable fraction of Canadian issuances in the United States involves riskier firms for which U.S. markets seem more mature.

Suggested Citation

  • Christian Calmès, 2004. "Regulatory Changes and Financial Structure: The Case of Canada," Staff Working Papers 04-26, Bank of Canada.
    • Handle: RePEc:bca:bocawp:04-26
    as

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    File URL: https://www.bankofcanada.ca/wp-content/uploads/2010/02/wp04-26.pdf
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    References listed on IDEAS

    as
    1. John H. Boyd & Mark Gertler, 1994. "Are banks dead? Or are the reports greatly exaggerated?," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 18(Sum), pages 2-23.
    2. Stiroh, Kevin J, 2004. "Diversification in Banking: Is Noninterest Income the Answer?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(5), pages 853-882, October.
    3. Charles Freedman & Clyde Goodlet, 1998. "The Financial Services Sector: Past Changes and Future Prospects," Technical Reports 82, Bank of Canada.
    4. Martin Miville & André Bernier, 1999. "The Corporate Bond Market in Canada," Bank of Canada Review, Bank of Canada, vol. 1999(Autumn), pages 3-8.
    5. Franklin Allen & Douglas Gale, 2001. "Comparing Financial Systems," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262511258, April.
    6. Charles Freedman, 1998. "The Canadian Banking System," Technical Reports 81, Bank of Canada.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Financial institutions; Financial services; Recent economic and financial developments;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

    NEP fields

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