Emerging from the Shadows: Market-Based Financing in Canada

BanK oF canaDa FinanciaL SYStem reVieW JUne 2011 obtain credit that they might not have been able to obtain otherwise . thus, if the associated risks—including both credit risk and liquidity risk—are properly managed, mBF can be a welfare-enhancing financial innovation . But the mBF sector involves a wide range of activities with different levels of benefits and risk . at the riskier end of the continuum are highly complex, opaque and levered securities, such as some of the non-bank-sponsored assetbacked commercial paper (aBcP) that existed before the crisis . in contrast, government-guaranteed mortgagebacked securities (mBS), such as the national Housing act (nHa) mBS program operated by the canada mortgage and Housing corporation (cmHc), while considered part of the mBF sector based on the above definition, lie at the lessrisky end of the range because of their lack of embedded leverage and the government guarantees that eliminate credit risk .