CMHC says its stress tests show it can withstand extreme economic scenarios

Canada Mortgage and Housing Corp. says its stress testing shows it will be able to withstand even the most extreme economic scenarios.

OTTAWA — Canada Mortgage and Housing Corp. says its stress testing shows it will be able to withstand even the most extreme economic scenarios.

The agency tested its mortgage loan insurance and securitization businesses against several scenarios including different changes in the unemployment rate and home prices.

The tests looked at the impact of a severe and prolonged economic depression and a plunge in the price of oil.

Other situations that were tested included a strong earthquake and a sudden rise in interest rates that causes a drop in housing prices and the failure of a Canadian financial institution.

They also looked at what would happen if a U.S. style housing correction occurred in Canada.

CMHC says the tests confirm that its capital holdings are sufficient.

“Stress testing involves searching out extreme scenarios that have a very remote chance of happening and planning for them,” said Romy Bowers, CMHC’s chief risk officer.

“Rigorous stress testing is an essential part of our risk management program and allows CMHC to evaluate its capital levels against these scenarios.”

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