The central bank's semi-annual financial stability review released Thursday states bluntly that Canadians need to start worrying about the worsening debt mess in Europe and its ability to hit home hard.
"The (bank's) governing council judges that the risks to the stability of Canada's financial system are high and have increased markedly over the past six months," it stated.
"Since June, the global retrenchment of risk associated with the European crisis has indeed resulted in a significant correction in the prices of equities and other risky assets, as well as a widening of credit spreads in Canada.
"Should the crisis deepen and spread further to the larger European economies, transmission to Canada could become more severe.... An adverse outcome for Europe would also raise the risk of a significant impairment of funding conditions for Canadian institutions."
Frankly, it says, measures currently undertaken to bring the European debt crisis under control "have repeatedly fallen short of what is needed."
European leaders were meeting later in the day for yet another attempt to come up with a solution to a debt crisis that have put countries in the eurozone, including Germany, on watch for a debt rating downgrade.
The TD Bank said in an analysis that the central bank's gloomy report "reinforces" their pessimism about Europe, and that global growth will worsen as risks continue to rise.
"Canada will largely be impacted by falling commodity prices, a hit to confidence and weaker export growth. Nonetheless, these events are likely to push the Canadian unemployment rate higher and asset values lower