Research

We emphasize and encourage links between academic researchers and practitioners at financial institutions to bring theoretical techniques to bear on real-world issues.

Pandemic Response

GRI  has developed a series of research papers and articles that explore various facets of the COVID-19 crisis and how it affects the economy and risks to financial sector stability.


POWERSHIFTS, PANDEMIC AND POPULISM IN EUROPE: Reflections for Canadian Financial Services

This paper explores recent political changes, or “power shifts”, in four of the largest European economies. Over the course of 2021-22, Italy, the  Netherlands, Germany and France have hosted or will soon play host to major elections and/or leadership transitions. These countries are all principal architects of continental integration, dating back to the creation of the European Coal and Steel Community in 1952. At times, the four states also reflect conflicting viewpoints in deliberations over political and macroeconomic policy.

TRANSITIONING FROM THE PANDEMIC: Towards a More Balanced Fiscal Policy

As Canada’s COVID-19 vaccination rates achieve critical thresholds in mid 2021, fundamental changes in fiscal policy are recommended to boost the Canadian economy’s supply side and make governments’ demand-side support more effective.

COVID-19 Triggers Great Nonfinancial Risk Crisis: Nonfinancial risk management best practices in Canada

COVID-19 Triggers Great Nonfinancial Risk Crisis: Nonfinancial risk management best practices in Canada Lois Tullo, Executive in Residence, Global Risk Institute Download the full Report – PDF Version INTRODUCTION The spread of viral disease COVID-19 is the most transformative nonfinancial risk (NFR) of this decade.  The uniting of strategy and risk management has never been… View Article

Primer on Gross Debt/GDP Risk in the Shadow of COVID-19: Canada Joins Top Debtor Nations

As the gross debt/GDP ratio grows, Canada faces the risk of increased interest coverage payments leading to reduced future fiscal flexibility. An acknowledgement of this increased risk must be met with an understanding of a plan to build the economy and to pay down the deficit. This raises a number of issues that need to be debated to address the risks coming in the future.

Adapting to COVID-19: A Behavioural Lens on Financial Institution Resilience

With Canada now in its second year of living with COVID-19, the pandemic continues to pose ongoing and new challenges for financial institutions (FIs) in building resilience. Beyond unprecedented health, financial and economic risks, FIs face future challenges managing staff, operations and client relationships during the broader vaccine rollout.

In Sickness and in Debt: The COVID-19 Impact on Sovereign Credit Risk

The COVID-19 pandemic provides a unique setting in which to evaluate the importance of a country’s fiscal capacity in explaining the relation between economic growth shocks and sovereign default risk. For a sample of 30 developed countries, we find a positive and significant sensitivity of sovereign default risk to the intensity of the virus’ spread for fiscally constrained governments. Supporting the fiscal channel, we confirm the results for Eurozone countries and U.S. states, for which monetary policy can be held constant. Our analysis suggests that financial markets penalize sovereigns with low fiscal space, thereby impairing their resilience to external shocks.

Fiscal Policy and the Economy’s Great Divide: Addressing the Income and Jobs Gap in the Traditional Economy

As Canada recovers in lopsided fashion from its historic economic contraction in the first half of 2020 (1H2020), the economic and social costs of the first-ever services-led recession are striking. The V-shaped recovery of equity and debt markets, and the surge in technology industries contrast starkly with the major income declines and job losses in much of the traditional economy. They make it essential to address the ongoing “Great Divide” among financial markets, technology sectors and most of the traditional economy.

Model Risk Management in the Current Pandemic Environment

The rapidly changing environment of the pandemic has strained the process of model development and independent validation functions in risk management. This paper discusses selected challenges institutions may face in its model risk management process and addresses some of these challenges, leveraging its traditional infrastructure for managing all risks on an enterprise wide level.

Canadian Bank Dividends: Income Importance During and Beyond the Pandemic

This article explores the benefits of Canadian bank dividends, beginning with two areas that are often too little recognized. The first is the significance of Canadian bank dividends to sustaining household cash flow and liquidity, including their rising share of retail investor incomes, attractive absolute and relative yields, and dependability. The second is the crucial role of bank dividends in seniors’ incomes, including the structural trends boosting their importance in funding retirees’ spending needs.

Financial Institution Operational Resilience: Pre and Post COVID-19

Once we move through this current crisis stage, we will have to deal with transition and, then, forge a sustainable path — a path that has been referred to as the “new normal”. This piece provides seven key guidelines for operational resilience on how to better position our financial institutions.

Regulatory Forbearance in the Age of COVID-19

Navigating the current crisis requires considerable professional judgement, which must be supported by a number of key elements, including; active stakeholder consultation, robust risk management information systems, effective governance and, importantly, guiding principles. In response to this unique challenge, financial regulators have begun to implement a wide range of special policy actions.

Bank Dividend Regulation: Impact of the COVID-19 Pandemic

With the world in the midst of the COVID-19 pandemic that has precipitated a severe global economic contraction, regulators and financial market professionals across the world have moved rapidly to prevent another financial crisis. As part of the regulatory initiatives intended to reduce the real economy impact and financial market strain, some regulators have been calling for coordinated, worldwide action to suspend all bank dividends for the foreseeable future.

Geopolitics in a Post-Pandemic World

COVID-19 sets a new precedent for the scale of a public health response and its vast economic consequences, but also poses longer-term geopolitical challenges and risks for Canadian financial services.

Global Survey of Dividend Policy During COVID-19

Regulators around the globe have been providing guidance to banks and insurance companies on how to proceed with dividends and share buybacks. It will be critical for financial institutions to achieve the appropriate balance between capital preservation for purposes of safety and soundness and the requirement to ensure they have the firepower to support their clients. There have been varied responses around the globe and we have captured them in order to help inform decision making.

GRAFT: COVID-19 Implications

The world has been at the edge of a tipping point for over a year. Spread of viral disease was the risk that toppled the market, closed businesses and borders, made remote work a norm, and unfortunately has taken an unprecedented number of lives. The interrelationship of Global Risks and Trends outlines the path that led the world to its current state, and provides a framework for identifying the implications of COVID-19, and the path forward.

COVID-19 and 3rd Party Suppliers: Questions Risk Managers Should be Asking

Given the significant and increasing reliance on outsourcing and 3rd party supplier relationships in the financial services sector, risk managers should also be evaluating potential impacts on service levels from developments relating to the COVID-19 situation. This brief covers the questions to ask of your own institution, and your 3rd party suppliers.