Suppose the rare event occurs that a major Canadian commercial bank is on the verge of insolvency and collapse due to volatile world credit markets.The likely initial response is

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In such a scenario, the Bank of Canada would act as the "lender of last resort" and provide necessary funds to the bank to prevent its collapse, as it has the responsibility to maintain financial stability in the country. This would prevent any potential systemic risk and ensure the smooth functioning of the financial system as a whole. Bankruptcy filing, asset sale or provision of funds by other institutions may not be enough to prevent the collapse of the bank and the resulting impact on the wider financial system. Therefore, providing funds by the Bank of Canada as the "lender of last resort" is the best choice in this situation.

Suppose the Rare Event Occurs That a Major Canadian Commercial