Finance is a combination of luck, good/bad decisions, and a little bit of chance!

Let’s talk about your ups and downs! What successes did you have this week? Who messed up?

  • Avid Amoeba
    2·
    1 year ago

    Right. Well, I was a bit worried when the American implisions happened earlier this year. Also knowing that some of our banks are now exposed a lot to the American market (TD AMCB). Also I have no idea how robust our banks are. I wouldn’t put bank runs out of the question here.

    • Affaires de PiassesOPM
      2·
      1 year ago

      While I’m no expert, I think the big Canadian banks (I’d say Big 6 + Desjardins in Quebec) are well capitalize and more regulated than their American counterparts, while a failure of a smaller bank shouldn’t have much impact since it could be absorbed easily through CDIC or provincial equivalents.

      Also, when it comes to mortgages, our banks are way less exposed to risk, as all mortgages are in fine variable rate since you can’t get a longterm fixed rate mortgage in Canada, so most of the risk has been transferred to customers. And due to the concentration in the banking industry, the government would IMO be there to support the banks anyway should something happen.

      So, maybe I’m biased, but I don’t think there is much risk, even though things are going to get tougher with the current economic situation, so we may see individuals and companies defaults rising, and banks taking part of the hit.

      A bank run is never out of the question, but with government support and CDIC coverage, most people should be covered anyway. Should something happen though, the government/CDIC could easily increase coverage as it worked well in the US to stabilise things out and printing money is much cheaper than having to go through a paradigm shift in the finance industry.

      • Avid Amoeba
        2·
        1 year ago

        Good points. I think savings accounts ETFs in particular like PSA might not end up being protected by CDIC.

        • Affaires de PiassesOPM
          2·
          1 year ago

          You’re right, but according to this page, PSA money is held with National Bank, Scotiabank, CIBC and BMO, with a few treasury bills. Those 4 banks are considered domestic systemically important bank, and a failure of any of them would have a serious impact on Canada’s economy, and probably warrant governmental intervention, so I personally wouldn’t worry that much.