superintendent for financial institutions ( osfi ), also demanded that banks with higher risks should further offset that risk with higher capital. capital not only had to be higher, it also had to be higher quality. osfi insisted that common equity form the predominant share ( at least 75 per cent ) of tier 1 capital. 3 focusing on risk - based capital adequacy ensured that banks with greater risks entered the turmoil with larger cushions against unexpected losses. at the time of the lehman failure, the at its peak, the bank of canada liquidity extension represented just under 3 per cent of gdp. this compares to peak liquidity extensions of about 8. 5 per cent of gdp in the united states, about 13 per cent in the european union and nearly 23 per cent in the united kingdom. for example, credit issued by the chartered banks to canadian households and businesses has exhibited monthly year - over - year growth of around 5 per cent, on average, from the beginning of 2007 to the present. prior to the crisis, osfi rules required common equity to account for at least 75 per cent of tier 1 capital. in other words, other components ( preferred shares and innovative and hybrid instruments ) were limited to 25 per cent. in january 2008, osfi relaxed the rules, allowing non - common sources to account for as much as 30 per cent of tier 1 capital. then, in november 2008, that limit was raised again to 40 per cent. see : http : / / www. osfi - bsif. gc. ca. average tier 1 capital ratio at canadian banks was about 10 per cent and their total capital ratio stood at almost 13 per cent. during the turmoil, all major canadian banks maintained, without reducing dividends, capital in excess of supervisory targets, and none required injections of government capital. again, crucially, this capital was predominantly made up of tangible common equity. during the panic, investors understandably lost faith in basel risk weights. gallingly, on the day before each went under, every bank that failed ( or was saved by the state ) reported capital that exceeded the basel ii standard by a wide margin. by the autumn of 2008, investors had already seen far too many major institutions hobbled by losses on purportedly risk - free securities such as leveraged super senior tranches of securitizations. many turned instead to simple leverage ratios to assess capital adequacy. canadian banks were already subject to such a stringent test. as

stephen s poloz : central bank of the year award remarks by mr stephen s poloz, governor of the bank of canada, at the central banking awards 2018, london, 1 march 2018. * * * it is an honour for me to accept the award for central bank of the year on behalf of the staff of the bank of canada. and it is a real pleasure to be here to celebrate the successes and achievements of central bankers from around the globe, such as my good friend lesetja kganyago of south africa. back in january, when central banking announced this award, you published an extensive writeup that detailed the reasons why we were judged to be worthy of it. i am very glad that you did so, because the article illustrates just how important teamwork is at the bank of canada. in that article, every employee in every department can see how their own work contributes to a central bank that is operating at the top of its game. from the model developers, to the currency designers, to the people who got us settled back in our renewed headquarters — everyone contributed to an outstanding body of work with remarkable skill and dedication. so, this award belongs to all the members of our incredible team. i would like to particularly thank central banking for recognizing the work we have done in terms of conducting monetary policy in an era of heightened uncertainty. we have been working on the theme of uncertainty since the global financial crisis revealed the limits of our models and our knowledge. and we have learned that it is far better to be open and honest about the uncertainty we face, as well as how we deal with it, rather than to just assume the uncertainty away and project a false sense of confidence. because profound uncertainties are everywhere, we began talking about monetary policy as an exercise in risk management, as opposed to the precision engineering that many believe the practice of monetary policy to be. to be truly honest about the uncertainties we face, we stopped providing routine forward guidance, which observers and market participants had come to rely on. we took some grief for this decision. but i am certain that the best and most honest approach is to communicate openly about the bank ’ s reaction function, and the key risks we see. this leaves market participants to interpret the data and make their own forecasts about the future path of interest rates. it has taken time, but markets and observers are increasingly adapting to our approach. this experience shows that open communications are vitally important — even more so in a world