Banking economics dial explorer

Revenue from lending and investing — the interest margin. It moves up and down with interest rates and loan volumes. This is what NIM measures.

Revenue that doesn't depend on interest rates — monthly account fees, credit card interchange, wealth management fees, insurance premiums, transaction charges. Stable and predictable regardless of rate cycles.

The proportion of total revenue from fees vs. spread. A higher fee mix is prized by investors because earnings are less exposed to rate swings. Canadian banks typically target 30–42% fee income.

The official accounting term for fee income — all revenue other than interest. Shows up on the income statement separately from net interest income.

High Quality Liquid Assets — the bank's emergency cash reserves. Assets you can sell instantly without losing much value: cash, Government of Canada bonds, provincial bonds. The bigger this pool, the more the bank can survive a crisis.

How much money the bank would bleed out in a 30-day stress scenario — if depositors panic and withdraw, credit lines get drawn, or wholesale lenders don't renew. Regulators assign a run-off rate to each liability type.

Liquidity Coverage Ratio — the 30-day survival test. HQLA ÷ stressed outflows. Must be ≥ 100%. Canadian D-SIBs typically run 125–155% as a buffer above the OSFI floor.

Net Stable Funding Ratio — the 1-year stability test. Does the bank have enough long-term stable funding to cover its long-term assets? Must also be ≥ 100%. Retail deposits score much better than wholesale here.

The percentage of a liability regulators assume will flee in a stress scenario. Chequing account: ~5% (you probably won't close it in a panic). Wholesale paper: 25–100% (institutions will not renew). Lower run-off = better for LCR.

Common Equity Tier 1 — the bank's highest-quality shock absorber. Mostly retained earnings (profits kept, not paid as dividends) plus common shares issued. If the bank suffers massive losses, CET1 absorbs them first. The bank's own skin in the game.

Not all $1 of assets carries the same risk. A GoC bond is near-zero risk; an unsecured personal loan is high risk. RWAs adjust assets by their riskiness — a $1M mortgage might count as $350K of RWA, while a $1M personal loan counts as $1M.

CET1 capital ÷ RWAs. The bank's safety buffer as a percentage. OSFI sets a floor for Canadian D-SIBs of ~11.5% including buffers. Higher above the floor = more capacity to grow loans, pay dividends, or absorb losses.

Domestic Systemically Important Bank — OSFI's designation for Canada's Big 6 (Scotiabank, TD, RBC, BMO, CIBC, NBC). They face stricter capital requirements because their failure would destabilize the entire financial system.