Resilience of Canada's Financial System: Despite facing challenges such as higher interest rates and economic shocks, Canada's financial system remains resilient, with proactive steps taken by households, businesses, banks, and other financial institutions to adapt.
Ongoing Adjustment Presents Risks: The adjustment process is still ongoing and poses risks to financial stability. Indicators of financial stress have risen, and concerns exist regarding stretched valuations of some financial assets, potentially leading to a sharp correction and system-wide stress.
Global Economic Context: While the risk of recession has diminished in Canada and globally, potential market volatilities persist as central banks adjust policy rates, and geopolitical and economic risks remain.
Importance of Proactive Risk Management: Financial system participants need to remain proactive in managing risks, with vigilance required from financial authorities. This includes monitoring developments in various sectors such as households, businesses, banks, and non-bank financial institutions, as well as addressing operational or structural risks like cyber attacks and climate change.