An analysis of recent financial events through the lens of the Canadian System

of National Accounts − Financial and Wealth Accounts

November 3, 2009

Allan Tomas, Chief, Financial and Wealth Accounts

23-04-21Statistics Canada • Statistique Canada2

Fundamental shifts in saving behaviour and net lending positions among sectors in the Canadian economy

-80

-60

-40

-20

0

20

40

60

1961 1966 1971 1976 1981 1986 1991 1996 2001 2006

-18-16-14-12-10-8-6-4-202468101214

Persons and unincorporated businesses Percent of GDP

Persons and unincorporated business

Surplus

Deficit

billions of dollars percent of GDP

-40

-20

0

20

40

60

1961 1966 1971 1976 1981 1986 1991 1996 2001 2006

-8-6-4-2024681012

Corporations and government business Percent of GDP

Corporations and government business

Surplus

Deficit

billions of dollars percent of GDP

-80

-60

-40

-20

0

20

40

60

1961 1966 1971 1976 1981 1986 1991 1996 2001 2006

-18-16-14-12-10-8-6-4-202468101214

Government Percent of GDP

Government

Surplus

Deficit

billions of dollars percent of GDP

Th

e settin

g

-60

-40

-20

0

20

40

1961 1966 1971 1976 1981 1986 1991 1996 2001 2006

-12

-10

-8

-6

-4-2

0

2

4

6

8

Non-residents Percent of GDP

Non-residents

Surplus

Deficit

billions of dollars percent of GDP

23-04-21Statistics Canada • Statistique Canada3

Shift in total debt from governments and corporations to the household sector

0

10

20

30

40

50

60

70

80

90

100

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Persons and unincorporated businesses sector (PUIB) Federal government sector

Other government sector Non-financial private corporations sector

debt / GDP (%)

Th

e settin

g

23-04-21Statistics Canada • Statistique Canada4

Economy increasingly wealth-driven, with growth in the value of assets, specifically in the household sector

Th

e settin

g

0

500

1,000

1,500

2,000

1990q1-1998q3 1998q4-2002q3 2002q4-2009q2

Cumulative change in PUIB net worth (excluding savings)

Cumulative PUIB net savings

billions of dollars

23-04-21Statistics Canada • Statistique Canada5

Securitization market for mortgages on the rise in Canada

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

55%

60%

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Canada United States

Securitized mortgages as a % of total mortgages

Th

e settin

g

23-04-21Statistics Canada • Statistique Canada6

Mortgage market more conservative in Canada

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Canada United States

Personal sector mortgage debt as a % of nominal GDP

Th

e settin

g

23-04-21Statistics Canada • Statistique Canada7

Household sector exposed to increasing interest rates given current debt levels

0

2

4

6

8

10

12

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

0

20

40

60

80

100

120

140

160

DSR Debt to personal disposable income

debt service ratio (%) debt to disposable income ratio (%)

Ris

k fa

ctors

23-04-21Statistics Canada • Statistique Canada8

Household sector portfolio takes on more risk

15%

20%

25%

30%

35%

40%

45%

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Deposits and fixed income assets of PUIB

Pension and segregated fund assets of PUIB

Equity and foreign investment assets of PUIB

ratio

Ris

k fa

ctors

23-04-21Statistics Canada • Statistique Canada9

Increased international integration of financial markets - Canadians' exposure increased - Foreign Property Rule

-30

-15

0

15

30

45

60

75

90

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008

Debt securities Stocks

billions of dollars

FPR 12% - 18% 25% - 30%20% No restriction

Note: Reverse of Balance of Payments signs.

Ris

k fa

ctors

23-04-21Statistics Canada • Statistique Canada10

IMPACT: Canadian institutional investors reduce foreign short-term debt in rapid response to global credit concerns (August 2007); foreign bonds follow suit in subsequent quarters

-12

-10

-8

-6

-4

-2

0

2

4

6

I II III IV I II III IV I II III IV I II III IV I II

Government Corporate financial Corporate non-financial

billions of dollars

Note: Reverse of Balance of Payments signs.

2005 2008 2007 2006 2009

Re

cen

t finan

cia

l eve

nts

23-04-21Statistics Canada • Statistique Canada11

IMPACT: Immediate, marked and sustained change in Canadian institutional investors’ foreign portfolio investment at the outset of credit concerns

-25

-20

-15

-10

-5

0

5

10

15

20

25

30

II III IV I II III IV I II III IV I II III IV I II

Debt securities Stocks

billions of dollars

Note: Reverse of Balance of Payments signs.

2005 2008 2007 2006 2009

Re

cen

t finan

cia

l eve

nts

23-04-21Statistics Canada • Statistique Canada12

IMPACT: The cross-border repurchase agreements market also grinds to a halt in 2007

-12

-10

-8

-6

-4

-2

0

2

4

6

8

10

I II III IV I II III IV I II III IV I II

Total liabilities, repurchase agreements

billions of dollars

2008 2007 2006 2009

Re

cen

t finan

cia

l eve

nts

23-04-21Statistics Canada • Statistique Canada13

IMPACT: In Canada, the asset-backed securities short-term paper market shuts down beginning mid-2007

-10

-8

-6

-4

-2

0

2

4

6

8

IV I II III IV I II III IV I II III IV I II III IV I II

Other short-term paper liabilities, Issuers of asset-backed securities (flows)

billions of dollars

2008 2007 2006 2005 2009 2004

Re

cen

t finan

cia

l eve

nts

23-04-21Statistics Canada • Statistique Canada14

The policy reaction: liquidity injection

Financial Inst

+56 T-bills

-50 mortg +32 repos

Fed GOV’T

+22 deposits,

+46 T-bills

Bank of Canada

+32 repos +22 deposits

ABS CMHC

+50 mortg

+50 bonds

+24 bonds

+24 claims

+26 bonds

Re

actio

n

+24 claims

-10 T-bills

23-04-21Statistics Canada • Statistique Canada15

Reaction: T-Bills are mostly purchased by chartered banks

-15

-10

-5

0

5

10

15

20

25

30

2008Q4

Chartered banks

Non-residents

Trusteed pension plans

Mutual funds

Bank of Canada

billions of dollars

Re

actio

n

23-04-21Statistics Canada • Statistique Canada16

Reaction: Substantial new short-term borrowing by the federal government in 08q4; initially, no change in government net debt

280

300

320

340

360

380

400

420

440

460

480

500

520

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Federal government - Credit market debt outstanding

billions of dollars

Re

actio

n

23-04-21Statistics Canada • Statistique Canada17

Reaction: Credit crunch in Canada?...evidence for non-financial corporations…supply or demand?

-8

-6

-4

-2

0

2

4

6

8

10

12

14

16

I II III IV I II III IV I II

Bank loans Other canadian bonds Shares

billions of dollars (flows)

2008 2007 2009

Re

actio

n

23-04-21Statistics Canada • Statistique Canada18

Canadian economy slows from 2007 and then contracts

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

II III IV I II III IV I II III IV I II III IV I II

Gross domestic product at market prices Final domestic demand

quarterly % change, chained (2002) dollars

2005 2008 2007 2006 2009

Re

su

lts

23-04-21Statistics Canada • Statistique Canada19

Canadian investors repatriated funds from international markets for the first time in 30 years

-20

0

20

40

60

80

1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008

billions of dollars

Note: Reverse of Balance of Payments signs.

Re

su

lts

23-04-21Statistics Canada • Statistique Canada20

Canada and US stock markets slide

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

S&P TSX Composite index

S&P 500 US index

S&P TSX Composite index S&P 500 US index

Re

su

lts

23-04-21Statistics Canada • Statistique Canada21

Household sector capital losses: Canada and United States

-10

-8

-6

-4

-2

0

2

4

6

8

I II III IV I II III IV I II III IV I II III IV I II

Canada United States

Household sector assets % change

2005 2008 2007 2006 2009

Re

su

lts

23-04-21Statistics Canada • Statistique Canada22

Point of Access – www.statcan.gc.ca

The Daily CANSIM National Economic

Accounts Module on: www.statcan.gc.ca

NBSA, FFA and BOP workshops

Consultation with Statistics Canada analysts

iead-info-dcrd@statcan.gc.ca

infobalance@statcan.gc.ca Ad-hoc analysis and data

requests Canadian Economic

Accounts Quarterly Review (CEAQR)

23-04-21Statistics Canada • Statistique Canada23

Release Dates – Financial Flow Accounts

Financial Flow data are available approximately 60 days after the reference period.

Release date Reference period

01-Dec-09 First quarter 2009 – Third quarter 2009

02-Mar-10 First quarter 2009 – Fourth quarter 2009

01-Jun-10 First quarter 2006 – First quarter 2010

01-Sep-10 First quarter 2010 – Second quarter 2010

01-Dec-10 First quarter 2010 – Third quarter 2010

02-Mar-11 First quarter 2010 – Fourth quarter 2010

Financial flow accounts 13-014-x and 13-010-x

23-04-21Statistics Canada • Statistique Canada24

2009 Release Dates – National Balance Sheet Accounts

National Balance Sheet Account data are available approximately 75 days after the reference period.

Release date Reference period

14-Dec-09 First quarter 2009 – Third quarter 2009

15-Mar-10 First quarter 2009 – Fourth quarter 2009

21-Jun-10 First quarter 2006 – First quarter 2010

13-Sep-10 First quarter 2010 – Second quarter 2010

13-Dec-10 First quarter 2010 – Third quarter 2010

14-Mar-11 First quarter 2010 – Fourth quarter 2010

National balance sheet accounts 13-214-x and 13-010-x