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February 4, 2020

February 4, 2020 – The rapid growth of the non-bank financial intermediation sector, formerly called shadow banking, appears to dilute monetary policy effectiveness in Canada and poses a risk to financial stability, according to a new report from the C.D. Howe Institute.

In “Water in the Wine? Monetary Policy and the Impact of Non-bank Financial Intermediaries,” authors Jeremy Kronick and Wendy Wu note while non-bank financial intermediaries (NBFIs) provide alternatives for both depositors and borrowers that improve the functioning of the economy by increasing competition, they are not as closely regulated as traditional financial institutions and deposit insurance does not cover their liabilities.

Jeremy Kronick
Jeremy Kronick

Jeremy is Associate Director, Research at the C.D. Howe Institute, where he is in charge of the financial services and monetary policy research programs.  He has written on a range of topics including the link between demographics and monetary policy, how blockchain technology will impact the economy, and the importance of the financial services sector in trade negotiations. 

Wendy Wu
Wendy Wu

Wendy Wu is Associate Professor at the Department of Economics, Wilfrid Laurier University.