FIN 701 Study Guide - Canada Deposit Insurance Corporation, Deposit Insurance, Moral Hazard

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Document Summary

Chapter 19 deposit insurance and other liability guarantees. Transfer system and to borrow from bank of canada. Office of the superintendent of financial institutions (osfi) was created to supervise federally regulated trusts, insurance companies, and banks. Bank of canada does not directly supervise and audit federally regulated fis but it does have mandate to ensure safety and soundness of financial system, and therefore its monetary policy affects both osfi and cdic. Regulatory forbearance regulators" policy of allowing an fi to continue to operate even when it is in breach of regulations in hopes that the situation will correct itself over time. Insolvency is caused from a number of external events or shocks that can adversely affect dtis (i. e. rise in interest rates in. 1979-1982; collapse of oil, real estate, and other commodity prices,; increase financial service firm competition at home and abroad; housing bubble burst in 2007) As economic conditions decline, overleveraged consumers and businesses default on their loans.

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