, on the other hand, can amplify or spread shocks throughout the system. and just as periods of uncertainty can test price stability, they can also test financial stability. 1 / 6 bis - central bankers'speeches the bank's approach to monitoring financial stability takes a broad view. canada's financial system is made up of a complex network of institutions, including banks and credit unions, pension funds and other asset managers. and many of our largest institutions operate globally. 1 we monitor the financial system for risks and vulnerabilities. vulnerabilities are weaknesses that often build over time and can make the system more susceptible to stress. they exist in almost any system. and, on their own, they may not lead to financial stress or instability. for that to occur you generally need a trigger - an event, or shock - whose impact can be amplified by the presence of vulnerabilities. it's the combination of these two things that can lead to periods of financial instability or, in extreme cases, a financial crisis. we use the information we gather in our monitoring to conduct research, inform policy decisions and communicate with canadians. we publish a report each spring and give an update each fall - both of which talk about global and domestic conditions and the state of the canadian financial system through the lens of the risks and vulnerabilities i just spoke of. and i am pleased to announce that today we launched an interactive dashboard of financial vulnerability indicators on our website. 2 we're sharing information on what we monitor to help people better understand the vulnerabilities we all face. the uncertain world we live in so, let's turn to an update on global financial conditions and the environment we're in today. it's an understatement to say that the past few years have seen major global economic changes and financial system developments. first, we are emerging from two years of a global pandemic and the resulting health and economic impacts. less than a year has passed since canada's economy fully reopened, and parts of the world - china, most notably - are still enduring lockdowns. this has had a dramatic and enduring effect on both supply and demand. as a result, inflation has risen in most countries around the world. in response, central banks have shifted rapidly to tighten monetary policy to bring inflation down. as interest rates rise, financial conditions are tightening, liquidity is scarcer, and risk assets are repricing. second

, geopolitical tensions have increased, primarily because of russia's invasion of ukraine. this has created a lot of volatility and uncertainty in global commodity markets, especially energy. and third, we have a legacy of debt coming out of the covid - 19 crisis. governments around the world took extraordinary measures to support people and businesses through economic shutdowns. businesses - particularly in hard - to - distance sectors - have endured a difficult few years, and some took on additional debt to get through them. 2 / 6 bis - central bankers'speeches and while some individuals and households were able to accumulate extra savings over the pandemic, others took on additional debt. these three forces - inflation, volatility in commodity and financial markets, and increased levels of debt - are not unique to canada. most countries around the world are facing these same challenges right now. but the impact on each country will depend, at least in part, on the resilience of that country's financial system - which in turn depends on those pre - existing vulnerabilities i just described. and given how interconnected the global financial system has become, and the fact that canada is a medium - sized, open economy, the impact here at home will also depend on how other countries weather the storm. housing and financial stability let's now take a closer look at two vulnerabilities we're watching closely - household debt and housing - and their relationship to financial stability. housing is certainly top of mind for many canadians these days. if you were to dig up the bank of canada's reports on financial system stability that i just mentioned, you would find analyses dating as far back as 2006 on escalating housing prices and increasing household debt. in other words, these two vulnerabilities have existed in canada's financial system for a long time. the buildup of these vulnerabilities continued after the global financial crisis in 2008 and 2009. canada's financial system sailed through that shock relatively smoothly, and our economy recovered more quickly than most. a decade of low interest rates, a growing population and constrained housing supply all combined to feed a steady march upward in house prices. higher house prices meant canadians were taking on more debt to buy homes. and as prices continued to rise quickly, some canadians saw housing as an investment opportunity as well as a source of shelter and took on additional debt to invest in housing. well before the arrival of covid - 19 canadians