Canadian Financial System and Challenges of 2020

Abstract

The article analyzes impact of the coronavirus crisis on the development of the Canadian financial system. At the beginning of 2020, the Canadian economy encountered a “perfect storm”. In Q1 2020, the fall in Canada’s GDP was probably the strongest in the country's history. Naturally, the social and economic difficulties that Canada, like other countries, faced in 2020 have a serious negative impact on the development of the country's financial system. However, a full-scale financial crisis has so far been avoided, primarily thanks to significant funds that the Canadian government directs to support the economy and the financial system. A special role is played by the Bank of Canada, which eases monetary policy, supports main financial markets, and provides additional liquidity to financial institutions. The scale of expansion of the Bank of Canada's balance sheet in March-April 2020 can be described as unprecedented. At the same time, changes in the Bank of Canada's asset structure clearly show that the central bank's balance sheet has become the main source of funding for the government’s anti-crisis plan.