Nevertheless, The Office of the Superintendent of Financial Institutions became concerned enough about connections between the two financial worlds in April of 2023 to include “transmission risk” from the non-bank financial intermediaries sector among the top risks to the financial system.
“OSFI has been engaged with banks in the early part of the year on this topic,” said Elizabeth Roach, a communications advisor for the regulator. “There will be losses incurred but doesn’t necessarily lead to a systemic problem — that would only occur if there is interconnected relationships among financial institutions that creates a domino effect,” he said.Article content
Commercial real estate is considered a hot spot for such vulnerabilities these days because there can be a lag effect. Assets such as office, apartment and retail towers tend to get appraised annually rather than “marked to market” daily, meaning there could be a sudden, large margin call if the value is written down steeply.Article content
— which is now in the midst of being swallowed by UBS in a rescue overseen by the Swiss government — and Japan’s Nomura Holdings Inc.Article contentPhoto by Stefan Wermuth/Bloomberg files
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