Bank Of Canada Takes Action To Sustain Financial System During Pandemic

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New York, USA — A stable financial system is essential to support the economy and overall development of a country. However, the recent pandemic and worldwide shutdown have knocked the stability out of Canada’s economic structure. In addition, covid-19 restrictions affected the market liquidity, housing schemes, and overall financial situation.

Despite the arising difficulties, the government officials and organizations launched financial relief programs and supported the efficient use of Credit card Canada to help stabilize the failing economic system.

To cope with the stress among the public affecting their financial health, the Bank of Canada took the matter into hands to sustain financial stability. Here’s a comprehensive summary of the overall situation:

Pandemic and Economy

The pandemic has been proved to be a deadly health risk to people worldwide and a serious obstacle to living everyday life. Global and Canadian economies also faced significant consequences due to the situation. Mainly, it impacted all the working sectors. However, some sectors like hospitality, energy, service industry, and transport were severely hit.

The public health sector took the following actions to help and stop the virus spread:

  • Closure of educational institutes
  • An all-time high emergency alert
  • Physical distancing and house lockdown measures

It is wise to say these actions helped stop virus spread but impacted the economic activities around Canada. Although, yes, the actions taken are temporary to cope with the current situation. Still, it will take time to rebalance everything happening around the country.

Review Of Financial System During Pandemic

In his speech, Tony Gravelle (Deputy Governor) explained how the central bank of Canada has been eyeing everything carefully to note the changes as the economy has slowly started recovering from the aftereffects of Covid-19. He also explained that due to the right counteract measures of the Bank of Canada, the country has not seen the severe hit as experienced in other places worldwide. Although he did mention some risks:

  • Financial fear in the general public
  • An increase in the household and mortgage debt
  • The overly expensive accommodation market
  • Unclear reporting of personal credit debt 

He further said that the Bank of Canada responded fast to recover and preserve market functioning. Also, the federal government implemented a variety of support and aid programs to assist millions of families and small/large businesses in filling their financial gaps.

Financial Stability Of Canada Before & After Pandemic

In discussion with OSC (Ontario Securities Commissions), Paul Beaudry stated that the Canadian economic structure suffered severe blows due to the Covid-19 restrictions and pandemic crisis. However, despite the threats, it has remained resilient and quite stable throughout, proving the great regulatory framework of the Central Bank of Canada.

He further pinpointed a few things, which are:

  • If the financial and economic changes (affected by pandemic) aren’t regulated, they can lead to severe financial vulnerability and hard to solve issues
  • If ignored, they can further elevate adverse pandemic shocks, thus adding fuel to the fire and leading to bad future financial outcomes

So, how has the Bank of Canada played a role in stabilizing the country’s economy and financial structure? Or, what actual sectors does it majorly support? Here are the answers:

Bank Of Canada Takes Actions To Support Sectors

Paul Beaudry remarked in his discussion that businesses experienced less bankruptcy despite the pandemic. Still, if the situation continues, it can further damage the household and small-scale businesses. In Financial System Review revealed by the bank, here’s what they conclude:

1. Household

The bank’s initial step was to make the credit affordable for all Canadian families. Further, they helped to sustain stability by:

  • Canada Mortgage Bond (now inactive) financed the homeowners in their mortgage lending to keep things in hand
  • Moreover, the bank and government worked to introduce public relief programs to help locals survive the crisis
  • The Bank started loan deferrable plan to help families keep their personal debt ratio low

Numerous small and large scale policies were introduced to support Canadian families in bringing positivity and optimism to deal with pandemic successfully.

2. Business

The business industry is the most affected sector including transport, tourism, local food, etc. The hit to brick and mortar shops was pretty bad compared to the eCommerce business market.

  • Bank of Canada partnered with officials to send government-supported wages to struggling businesses
  • CEBA (Canada Emergency Business Account) offered subsidized and funding loans to help small business owners
  • CECRA (Canada Emergency Commercial Rent Assistance) and CERS (Canada Emergency Rent Subsidy) also helped the highly affected sectors of food and travel businesses

The bank reduced the borrowing rate to help businesses with the cash flow and interest. It also introduced asset program which introduced the least possible interest rates on existing business loans.

3. Financial Market

The main goal of the bank was to sustain the economy by passing the introduced policies and programs to the lowest sector.

  • A short-term borrowing program was introduced to keep the market liquidity running effectively and smoothly
  • PBPP (Provincial Bond Purchase Program) enabled the funding of the provincial government to support the well-functioning of financial market
  • Under GBPP (Government of Canada Bond Purchase Program), the Bank of Canada bought the government bonds in secondary market to help sustain the economy and country’s financial condition

All the policies and initiated steps played an important role in the resilience of the financial structure of Canada. It also supported the monetary stimulus that kept the economy going strong even during the pandemic.

Bottom Line

The vulnerability and the failing threat of Canada’s economy was high during the pandemic. However, due to the early actions of the Bank of Canada and government strategies, we survived the deadly Covid-19 without going down. Further, the deputy governor states that the bank will keep looking out for vulnerabilities in the system to take action on the spot when needed.

Lastly, the bank states it’s good to focus on the economic future of Canada but, we can’t also ignore the ongoing crisis just because the right measures were taken to fight the pandemic.

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Disclaimer: The views, suggestions, and opinions expressed here are the sole responsibility of the experts. No Michigan Journal USA journalist was involved in the writing and production of this article.