Shadow Banking in Canada Poses Challenges in Coronavirus Crisis

The Canadian shadow banking sector has been growing at a rapid pace since the 2008–09 financial crisis, outpacing the growth of the country's dominant banking sector. This growth has predominantly been driven by the funds segment, which has increased in tandem with the growth of the wealth of individuals, encouraged in particular by the growth of their retirement accounts. Low interest rates and the search for yield have also been key drivers. All in all, the growth of the shadow banking sector could pose a challenge for Canada because, especially in the current uncertain environment, disruptions from nonbank financial institutions could have a widespread impact on the financial system at large.