of the story. the bank recently established the canadian fixed - income forum to enable a continuing dialogue, and we ’ ve modified our operations to help alleviate some of these issues. the governing council believes it ’ s important to continue studying the matter, not just as it pertains to government bonds, but also to other asset classes. given the new regulatory architecture, we may not know just how resilient market liquidity is until there ’ s a true stress event. let me now turn to vulnerabilities being created by persistently very low interest rates in canada. the post - crisis situation has quite naturally fuelled the accumulation of household debt, as well as heightened activity in the housing sector. we can observe other elements of risky financial behaviour, but these two vulnerabilities have been our main focus for some time and have continued to grow in importance since our last fsr. in terms of household debt, income growth hasn ’ t kept pace with increases in borrowing, since mortgage growth continues to rise. more borrowing was expected, given the reductions in our policy interest rate earlier this year. it ’ s important to remember that while rate reductions have increased vulnerabilities at the margin, they ’ ve also mitigated the risk to the bis central bankers ’ speeches financial system by helping offset the decline in incomes and employment tied to the drop in commodity prices. our analysis shows that there has been an increase in the number of highly indebted households in canada, by which i mean those whose debts are more than 350 per cent of their annual gross income. not only are there more of these highly indebted households, they also carry a growing share of household debt. these people are more likely to live in british columbia, alberta or ontario, where house price gains have been the largest. the governing council ’ s reading of the situation is that these vulnerabilities are quite highly concentrated – about 720, 000 households fall into this vulnerable category. in terms of the housing market, we continue to see regional markets evolving along different tracks, as we ’ ve indicated before. activity in the energy - producing regions of alberta, saskatchewan, and newfoundland and labrador has declined noticeably, which was expected following the decline in oil prices. the housing markets of toronto and vancouver have seen renewed momentum, driven by stronger employment growth and migration, both interprovincial and international. the governing council ’ s base - case scenario continues to be a constructive one : housing activity should stabilize in

line with economic growth as the driver of growth in the economy switches from household spending to non - resource exports. however, recent momentum in prices in toronto and vancouver may increase the likelihood of a correction in house prices, which could affect vulnerable households. unsurprisingly, house prices are correcting in oilproducing regions. as in the past, we have illustrated how certain triggers could turn these vulnerabilities into full - blown risks to the canadian financial system. risks assessed in this fsr are ( 1 ) a severe recession that would reduce households ’ ability to service their mortgages and cause a broad correction in house prices ; ( 2 ) an unexpectedly sharp rise in global risk premiums that could spill over to the cost of domestic financing ; ( 3 ) economic or financial stress emanating from china and other emerging markets ; and ( 4 ) more downside risk in resource pricing. these risks are not meant to be exhaustive but rather are used to illustrate the potential consequences of the vulnerabilities we have identified. other possible triggers might include a large - scale credit event in the global resource sector or a sovereign credit event, for example. the governing council acknowledges that certain vulnerabilities are still edging higher, but the overall level of risk they pose to the canadian financial system has remained roughly unchanged since our june report. in this regard, recent changes by canadian authorities to the rules for mortgage financing will help to mitigate these risks as we move into 2016. finally, i ’ d note that the fsr features reports that take a close look at aspects of the canadian and global financial systems. with this issue, there ’ s a report that analyzes the microdata related to household debt, as well as a review of mortgage securitization in canada. these are very important and useful reports, and i hope you ’ ll take the time to read them. with that, carolyn and i will be happy to respond to your questions. bis central bankers ’ speeches