Efficiency and Competition in Canadian Banking

Allen and Engert report on recent research at the Bank of Canada on various aspects of efficiency in the Canadian banking industry. This research suggests that, overall, Canadian banks appear to be relatively efficient producers of financial services and they do not exercise monopoly or collusive-oligopoly power. The authors note the value of continuing to investigate opportunities to improve efficiency and competition in financial services in Canada.

Financial Developments in Canada: Past Trends and Future Challenges

Freedman and Engert focus on the changing pattern of lending and borrowing in Canada in the past thirty to forty years, including the types of financial instruments used and the relative roles of financial institutions and financial markets. They examine how borrowing mechanisms have changed over time and consider the challenges facing the Canadian financial sector, including whether our financial markets are in danger of disappearing because of the size and pre-eminence of U.S. financial markets. Some of the trends examined here include syndicated lending, securitization, and credit derivatives, a form of financial engineering that has become increasingly important in the last few years. They also study bond and equity markets to determine whether Canadian capital markets have been hollowed out or abandoned by Canadian firms and conclude that the data do not provide much support for that view.

Conference Summary: Money, Monetary Policy, and Transmission Mechanisms

This article summarizes the proceedings of a conference hosted by the Bank of Canada in November 1999. Three major themes emerged at the conference. The first concerned uncertainty about the transmission mechanism by which monetary policy affects output and inflation. The second concerned the potential usefulness of monetary aggregates in guiding the economy along a stable non-inflationary growth path. The third was the recent developments in dynamic monetary general-equilibrium models. The work presented suggests that a wide range of models is useful for understanding the various paths by which monetary policy actions might influence the economy.

The Large-Value Payments System: Insights from Selected Bank of Canada Research

Given the Bank of Canada's strong interest in the safe and efficient operation of major clearing and settlement systems, the Bank maintains a rigorous research agenda as a means of informing payments system policy and oversight. In this article, Arjani and Engert review recent research undertaken by Bank staff concerning the risk and efficiency of the Large Value Transfer System (LVTS). Based on the findings from this research, the authors conclude that the design of the LVTS strikes an effective balance between risk and efficiency. The article also demonstrates the increased use of simulation analysis as a tool for conducting payments system research. A brief summary of the Bank's oversight strategy for systemically important payments systems is also provided. Goals for future research are noted as well, including modelling of participant behaviour and continued external collaboration with other researchers.

Bank of Canada Liquidity Actions in Response to the Financial Market Turmoil

In response to the financial crisis of 2007-09, the Bank of Canada intervened repeatedly to stabilize the financial system and limit the repercussions of the crisis on the Canadian economy. This article reviews the extraordinary liquidity measures taken by the Bank during this period and the principles that guided the Bank's interventions. A preliminary assessment of the term liquidity facilities provided by the Bank suggests that they were an important source of liquidity support for some financial institutions and, on a broader basis, served to reduce uncertainty among market participants about the availability of liquidity, as well as helping to promote a return to well-functioning money markets.

The Bank of Canada as Lender of Last Resort

As the ultimate provider of Canadian-dollar liquidity to the financial system, the Bank of Canada has the unique capacity to create Canadian-dollar claims on the central bank and the power to make secured loans or advances to chartered banks and other members of the Canadian Payments Association. The Bank supplies overnight credit on a routine basis through the Standing Liquidity Facility (SLF) to direct participants in the Large Value Transfer System, and Emergency Lending Assistance (ELA) to solvent deposit-taking institutions that require more substantial and prolonged credit. The authors review the policy framework that guides the Bank's lender-of-last-resort function, including the key issues, terms and conditions, and eligibility criteria associated with its SLF and ELA activities. Also discussed are foreign currency ELA, the relationship between SLF and ELA, systemic risk and Bank of Canada intervention, and the potential provision of liquidity to major clearing and settlement systems.

Are Canadian Banks Efficient? A Canada--U.S. Comparison

The authors compare the efficiency of Canada's largest banks with U.S. commercial banks over the past 20 years. Efficiency is measured in three ways. First, the authors study key performance ratios, and find that Canadian banks are as productive as U.S. banks. Second, they investigate whether there are economies of scale in the production functions of Canadian banks and broadly comparable U.S. bank-holding companies (BHCs). They find larger economies of scale for Canadian banks than for the U.S. BHCs, which suggests that Canadian banks are less efficient in terms of scale, and have more to gain in terms of efficiency benefits from becoming larger. Third, the authors measure cost-inefficiency in Canadian banks and in U.S. BHCs relative to the domestic efficient frontier in each country (the domestic best-practice institution). They find that Canadian banks are closer to the domestic efficient frontier than are the U.S. BHCs. Canadian banks have also moved closer to the domestic efficient frontier than have the U.S. BHCs over time. Finally, the authors examine the dispersion in cost-inefficiency found in Canadian banks and attribute some of the dispersion to differences in information and communication technology investment. Comparisons are made with the U.S. BHC experience.Financial institutions

Recent developments in monetary aggregates and their implications

In 1995, the broad aggregate M2+ grew at an annual rate of 4.5 per cent -- almost twice the rate recorded in 1994 -- as competition from mutual funds drew less money from personal savings deposits. An adjusted M2+ aggregate, which internalizes the effect of close substitutes such as CSBs and certain mutual funds, grew by only 3.4 per cent. Gross M1 grew by 8.2 per cent during the year, reflecting an increased demand for transactions balances as market interest rates declined and as banks offered more attractive rates of interest on corporate current account balances. The robust growth of gross M1 in the second half of 1995 suggests a moderate expansion of economic activity in the first half of 1996, while moderate growth in the broad aggregates indicates a rate of monetary expansion consistent with continued low inflation. In this annual review of the monetary aggregates, the authors also introduce a new model, based on calculated deviations of M1 from its long-run demand, which suggests that inflation should remain just below the midpoint of the inflation-control target range over the next couple of years.

EEG revealed improved vigilance regulation after stress exposure under Nx4: A randomized, placebo-controlled, double-blind, cross-over trial

ObjectivesVigilance is characterized by alertness and sustained attention. The hyper-vigilance states are indicators of stress experience in the resting brain. Neurexan (Nx4) has been shown to modulate the neuroendocrine stress response. Here, we hypothesized that the intake of Nx4 would alter brain vigilance states at rest.MethodIn this post-hoc analysis of the NEURIM study, EEG recordings of three, 12 min resting-state conditions in 39 healthy male volunteers were examined in a randomized, placebo-controlled, double-blind, cross-over clinical trial. EEG was recorded at three resting-state sessions: at baseline (RS0), after single-dose treatment with Nx4 or placebo (RS1), and subsequently after a psychosocial stress task (RS2). During each resting-state session, each 2-s segment of the consecutive EEG epochs was classified into one of seven different brain states along a wake-sleep continuum using the VIGALL 2.1 algorithm.ResultsIn the post-stress resting-state, subjects exhibited a hyper-stable vigilance regulation characterized by an increase in the mean vigilance level and by more rigidity in the higher vigilance states for a longer period of time. Importantly, Nx4-treated participants exhibited significantly lower mean vigilance level compared to placebo-treated ones. Also, Nx4- compared to placebo-treated participants spent comparably less time in higher vigilance states and more time in lower vigilance states in the post-stress resting-state.ConclusionStudy participants showed a significantly lower mean vigilance level in the post-stress resting-state condition and tended to stay longer in lower vigilance states after treatment with Nx4. These findings support the known stress attenuation effect of Nx4

Nonspecific synaptic plasticity improves the recognition of sparse patterns degraded by local noise

Safaryan, K. et al. Nonspecific synaptic plasticity improves the recognition of sparse patterns degraded by local noise. Sci. Rep. 7, 46550; doi: 10.1038/srep46550 (2017). This work is licensed under a Creative Commons Attribution 4.0 International License. The images or other third party material in this article are included in the article’s Creative Commons license, unless indicated otherwise in the credit line; if the material is not included under the Creative Commons license, users will need to obtain permission from the license holder to reproduce the material. To view a copy of this license, visit http://creativecommons.org/licenses/by/4.0/ © The Author(s) 2017.Many forms of synaptic plasticity require the local production of volatile or rapidly diffusing substances such as nitric oxide. The nonspecific plasticity these neuromodulators may induce at neighboring non-active synapses is thought to be detrimental for the specificity of memory storage. We show here that memory retrieval may benefit from this non-specific plasticity when the applied sparse binary input patterns are degraded by local noise. Simulations of a biophysically realistic model of a cerebellar Purkinje cell in a pattern recognition task show that, in the absence of noise, leakage of plasticity to adjacent synapses degrades the recognition of sparse static patterns. However, above a local noise level of 20 %, the model with nonspecific plasticity outperforms the standard, specific model. The gain in performance is greatest when the spatial distribution of noise in the input matches the range of diffusion-induced plasticity. Hence non-specific plasticity may offer a benefit in noisy environments or when the pressure to generalize is strong.Peer reviewe