News Analysis Canada’s major banks, institutional investors, and homebuyers took on more risk than normal during a prolonged period of low interest rates, a distortion that may have a cruel correction as interest rates rise to curb inflation and some households struggle to handle higher servicing costs on their mortgages. Respondents to the Bank of Canada’s recent Financial System Survey of 60 banks, pension funds, insurers, brokers, asset managers, and select others indicated that the period of low interest rates over the past decade made them less safe in their pursuit of financial returns. “Overall, most respondents stated that they are more exposed to risky assets, yet they believe that their level of risk has not changed significantly. Combined with their high level of confidence in the financial system, attributed in part to the pandemic response of authorities, this may suggest moral hazard,” the report warned. Investopedia.com defines moral hazard as …