Karsten Wenzlaff, Advisor
August 26th, 2025
Karsten Wenzlaff is a Crowdfunding and Fintech Expert from Germany. He is Secretary-General of Digit[...]
Stronger Bank–NBFI Links Show Why Data Matters Most
Bank of Canada Research | Nov 14, 2025
Image: Perceived interconnections between banks and NBFIs (Bank of Canada Staff Report, November 2025)
Deeper market linkages call for smarter transparency
On November 13 2025, the Bank of Canada Staff published Analytical Note 2025-26 titled, "Perceived interconnections between Canadian banks and non-bank financial intermediaries under stress" (16 page PDF), that examines how stress spreads between banks and non-bank financial intermediaries (NBFIs) such as investment and mortgage funds. While the research found that market-based linkages between banks and non-banks have grown much stronger over the past decade, it offers no specific policy steps.
See: Budget 2025 Accelerates Fintech, AI, and Capital Growth
For Canada’s fintech and regulatory communities, that leaves room to build smarter transparency and data-driven tools that improve resilience while encouraging innovation.
A System That Moves Together
The Bank used a market-based metric called the ratio of tail sensitivities to track how often banks and NBFIs experience stress at the same time. In simple terms, it measures how likely both sectors are to face sharp losses together when markets turn volatile.
Before the pandemic, that overlap was around 60%, meaning stress in one sector often stayed contained. During 2020 (Covid-19), the overlap jumped to almost 90%, showing that both banks and NBFIs were hit by the same shocks at once.
Post Covid-19, it has stayed above 70%. This signals that Canada’s financial system now behaves more like a single network where investor confidence, liquidity, and risk pricing can ripple quickly across different parts of the market.
What the Study Doesn't Measure
The analysis relies on market indicators such as price changes and co-movement ratios. These signals show how banks and non-banks react to market stress, but they don't track the underlying funding flows, repo exposure, or off balance sheet commitments that reveal how those stresses move in practice. The Bank acknowledges that data gaps make it hard to see how financial stress truly spreads between institutions.
See: BNPL Plans Are Starting to Affect Credit in Canada
The research measures perceived connections through statistical patterns rather than verified, real time data linkages. That distinction matters. Without deeper, connected data, it is harder to see where vulnerabilities are forming or how quickly they could spread. Closing that gap doesn't necessarily require new regulation but better tools and shared information that improve resilience while encouraging innovation.
Better Information, Better Decisions
Regulators already monitor funding and liquidity in near real time, but the Bank of Canada notes that current data still do not explain how financial stress moves between different parts of the system. The missing piece is insight into how one market’s strain can quickly affect another’s ability to function.
For example, if liquidity tightens in the mortgage or bond market, investment funds might sell assets to meet investor redemptions. Those sales can push down prices, reducing the value of collateral that banks use for their own lending and funding. Within hours, what starts as a localized funding issue can spread to other sectors that rely on those same assets. Economists have long modelled this type of stress transmission, but those models depend on historical or aggregated data. They show how shocks can travel but not how fast they move in real time.
See: Where the Gaps Are: Fintech Insights from FCA Data
RegTech innovation could help close this gap. Shared data platforms, digital reporting tools, and secure analytics could give both regulators and market participants a clearer view of where risks are forming. Instead of expediting new rules, the opportunity is better information that allows for faster, better, data-driven action. Fintechs can play a leading role by designing systems that make oversight smarter, not heavier, while strengthening confidence across the financial system.
Why It Matters Now
If Canada wants to maintain stability and support innovation, it needs visibility into where financial pressure builds. The Bank of Canada's findings show that perceived connections already move markets but without deeper real-time data access, those perceptions could harden into real stress events. The opportunity is to turn perception into understanding and make transparency Canada’s real advantage.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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