Bank of Canada Says Financial System Held Up but Vulnerabilities Have Grown

The Bank of Canada has assessed that the country's financial system functioned well through a challenging year, even as it flagged rising risks from a more turbulent global environment. In its Financial Stability Report, the central bank said households and businesses remain in generally stable financial condition and that banks have strengthened their capacity to absorb shocks, leaving the core of the system resilient. At the same time, it cautioned that vulnerabilities have increased in some parts of the system and that external developments, from trade tensions to geopolitical conflict, pose risks to stability. The report reflects an economy navigating uncertainty tied to shifting global trade relationships and elevated borrowing costs, with the central bank having held its policy rate at 2.25%. Canadian regulators have continued to emphasise credit risk, liquidity and operational and technology resilience as supervisory priorities. The overall message is one of cautious reassurance: the financial system is well positioned to keep functioning and supporting the economy, but authorities are monitoring pockets of stress closely and stand ready to act if conditions deteriorate. Consumers and businesses are encouraged to prepare for a range of scenarios.