The Canadian Securities Administrators (CSA) for the first time is publishing its Systemic Risk Committee’s annual report, the 2023 Annual Report on Capital Markets. They say they are doing this to promote market integrity and stability by demonstrating oversight and transparency.

Key trends and vulnerabilities 

Key trends and vulnerabilities examined in the report include high inflation and interest rates, benchmark changes ongoing in capital markets and the possibility that large dealers could fail. Crypto assets, the bond market, over-the-counter derivatives and clearing are all also discussed. 

Established in 2009, the risk committee’s report is based on an annual systemic risk survey, sent to portfolio managers and investment dealers in Canada. “The CSA’s Systemic Risk Committee (SRC) is the principal forum through which CSA staff analyze and monitor systemic and emerging risks,” the report’s preamble states.

Among the report’s findings, the CSA says: 

  • The future path of interest rates and the economic outlook remains highly uncertain, but the committee is of the view that risks to financial stability in Canadian capital markets are well contained.
  • The higher interest rate environment has not adversely impacted bond trading activity; turnover and other metrics remain within normal ranges.
  • Crypto asset markets remain volatile and unstable but the links between the crypto asset sector and traditional financial markets appear limited.
  • The failure of a large dealer could have broad repercussions but appropriate measures to prevent failure are in place and leverage levels remain low.
  • Investment fund liquidity risks are low and well-managed.
  • Exempt funds investing in private assets report liquidity mismatches.

“Overall, the report highlights that risks to financial stability in Canadian capital markets are well contained,” the CSA stated in an announcement about the publication’s release. “The mitigation of systemic risk is a core component of the CSA’s mandate,” adds Stan Magidson, CSA chair and chair and CEO of the Alberta Securities Commission. “Observations contained in this report are essential to practices that support the reduction of financial vulnerabilities.”