Ken Hanly writes:
> Canadian banks as the article mentions are publicly owned only in the
> sense of being listed on the stock market and as you thought in effect
> privately owned. Our banks are no doubt more regulated than in the US and
> so were not exposed to as many risky investments as many US banks--but
> they have no been completely immune either. In spite of their high rating
> internationally they have nevertheless suffered from the effect of events
> elsewhere. Recent earnings reports though show they are surviving in
> relatively good condition.
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I agree with Ken that so far the banks are holding their own, for all of the
reasons which have been cited in the media and elsewhere - with the caution
that it's still early days. Canada is only now beginning to feel the effects
of the global economic crisis precipitated by its largest trading partner.
In December, the country recorded its first trade deficit and worst monthly
drop in more than three decades. January employment also posted a record
monthly drop, exceeding, as in the US, the most dire forecasts. The year
long slide in housing prices in Vancouver, Toronto, and Calgary has begun to
spread to other cities. The Finance Minister has warned that Monday's GDP
news will be grim.
So far, it is the public pension plans rather than the banks who are the bete noire of the financial system. They've speculated heavily and have been torched by asset-backed and other derivatives. This past week, the largest of them, Quebec's Caisse de dépôt et placement, and OMERS, the Ontario municipal workers' plan, announced record multi-billion dollar losses, and the federal employee plan is expected to soon reveal similar carnage. Official assurances that they're backed by the taxpayers is cold comfort to anxious current and future pensioners on defined-benefit plans.
The regulators have forced the banks, despite their protests, to raise fresh capital and bulk up their reserves in the face of the storm. As elsewhere, they're also probably running well behind the trajectory of events. We'll know for certain if we next see the Canadian banks on the cover of Time magazine.