Bank of Canada says system resilient, warns of global risks.

The Bank of Canada has declared the nation's financial system resilient following a challenging year, but warned that mounting global risks could test that strength if multiple shocks occur simultaneously. The central bank issued its annual Financial Stability Report on Thursday, outlining key vulnerabilities related to geopolitics, artificial intelligence, and global sovereign debt.

Senior Deputy Governor Carolyn Rogers, who presented the report, stressed that the assessment is not a forecast and does not guide interest rate decisions. She stated that while individual vulnerabilities appear manageable, the increasingly volatile economic and geopolitical environment raises the likelihood that a new shock could cause several to crystallize at once. "This has made it more likely that a new shock or combination of shocks could cause several vulnerabilities to crystalize at once," Rogers said, warning of a potential cascading effect that could sharply reduce investor confidence and trigger rapid asset sales.

The report identifies several specific areas of concern. Geopolitical uncertainty, particularly from the ongoing conflict involving Iran, poses a significant risk by...