{"id":45227,"date":"2023-05-08T19:41:34","date_gmt":"2023-05-09T00:41:34","guid":{"rendered":"https:\/\/prefblog.com\/?p=45227"},"modified":"2023-05-08T19:41:34","modified_gmt":"2023-05-09T00:41:34","slug":"may-8-2023","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=45227","title":{"rendered":"May 8, 2023"},"content":{"rendered":"

The Fed has released<\/a> its Financial Stability Report for May 2023<\/a>:<\/p>\n

Large banks that were subject to the liquidity coverage ratio (LCR) continued to maintain levels of high-quality liquid assets (HQLA) that suggested that their liquid resources would be sufficient to withstand expected short-term cash outflows.<\/p>\n

Prime MMFs and other cash-investment vehicles remain vulnerable to runs and, hence, contribute to the fragility of short-term funding markets. In addition, some cash management vehicles, including retail prime MMFs, government MMFs, and short-term investment funds, maintain stable net asset values (NAVs) that make them susceptible to sharp increases in interest rates. The market capitalization of the stablecoin sector continued to decline, and the sector remains vulnerable to liquidity risks like those of cash-like vehicles. Some open-end bond mutual funds continued to be susceptible to large redemptions because they must allow shareholders to redeem every day even though the funds hold assets that can face losses and become illiquid amid stress. Liquidity risks at central counterparties (CCPs) remained low, while liquidity risks at life insurers appeared elevated.
\n…<\/b>
\nThe amount of HQLA decreased across all types of banks over the past year, driven by decreases in reserves and reductions in market values of securities portfolios due to rising interest rates (figure 4.2).
\n…<\/b>
\nSome banks increased their reliance on wholesale funding sources, though banks\u2019 overall reliance on short-term wholesale funding remained near historically low levels (figure 4.3). Even with the declines in HQLA, U.S. G-SIBs\u2019 LCRs\u2014the requirement that banks must hold enough HQLA to fund estimated cash outflows during a hypothetical stress event for 30 days\u2014remained well above requirements.<\/p><\/blockquote>\n

I was struck by how much the holdings of HQLA have diverged (by size of bank) since the Credit Crunch:<\/p>\n

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The BoC has announced<\/a>:<\/p>\n

is launching an online public consultation on the features that could be included in a digital Canadian dollar.<\/p>\n

The consultation opened today and runs until June 19.<\/p>\n

The way Canadians pay for everything from the daily necessities to major purchases is evolving rapidly. As the world becomes increasingly digital, the Bank\u2014like many other central banks\u2014is exploring a digital version of Canada\u2019s national currency.<\/p>\n

\u201cAs Canada\u2019s central bank, we want to make sure everyone can always take part in our country\u2019s economy. That means being ready for whatever the future holds,\u201d said Senior Deputy Governor Carolyn Rogers.<\/p>\n

At this time, a digital Canadian dollar is not needed. And any decision to issue one rests with Parliament and the Government of Canada.<\/p>\n

A digital Canadian dollar issued by the Bank would have to be designed to serve Canadians\u2019 needs. That\u2019s why the Bank is holding this online consultation: to understand which features are most important to Canadians. The Bank is also seeking opinions about topics related to a digital dollar, such as:<\/p>\n