Canada, the new Switzerland?

[FIREd]

I found this very interesting article on Bloomberg:

Bloomberg.com: Obama in Canada Finds World’s Best Financial System

...no country among the so-called industrialized nations is showing as much confidence in its bankers as Canada. Not one government penny has been given to any of the 21 banks from British Columbia to Quebec since credit worldwide seized up in August 2007...Just two Canadian regional banks have failed since 1923...Canada has always had a fairly conservative banking sector.

Switzerland used to be known for its conservative banking sector, but clearly they lost their way. Canada, with its strong banking system, stable democracy, and small deficits is looking very attractive right now. Anyone investing there?

 

[haha]

I found this very interesting article on Bloomberg:

Bloomberg.com: Obama in Canada Finds World’s Best Financial System



Switzerland used to be known for its conservative banking sector, but clearly they lost their way. Canada, with its strong banking system, stable democracy, and small deficits is looking very attractive right now. Anyone investing there?

I own several Canadian issues. Not so much because I wanted to be in Canada but that I wanted these companies.

Ha

 

[yakers]

Remember Nortel? Things can go wrong in Canada too. Good to hold some Canadian assets but I would not over weight Canada.

 

[Gpond]

Will cautious Canada be the new Switzerland? *AUDIO*

 

[ERD50]

I'm curious about something. Were these Canadian banks motivated by their government to take on risky mortgages? If not, maybe that is part of the reason they are stable.

Did Canada have anything equivalent to the Freddie, Fannie, the Community Reinvestment Act and other governmental "help"?

-ERD50

 

[HFWR]

I'm curious about something. Were these Canadian banks motivated by their government to take on risky mortgages? If not, maybe that is part of the reason they are stable.

Did Canada have anything equivalent to the Freddie, Fannie, the Community Reinvestment Act and other governmental "help"?

-ERD50

The mortgage companies were lining up to make these risky loans, because Wall Street was throwing money at them by the train load, because there was a big demand, and lots of money to be made, repackaging this trash as AAA, and selling it to investors. There's plenty of blame to go around...

 

[ERD50]

The mortgage companies were lining up to make these risky loans, because Wall Street was throwing money at them by the train load, because there was a big demand, and lots of money to be made, repackaging this trash as AAA, and selling it to investors. There's plenty of blame to go around...

I agree there is plenty of blame to go around. But if Canada was different, why?

-ERD50

 

[schmidtjas]

In Canada we have the CMHC, which insures mortgages and is a government agency. They take a pretty sizeable (1-3% I believe) premium on all mortgages that have less than 20% down.

 

[FIREd]

Remember Nortel? Things can go wrong in Canada too. Good to hold some Canadian assets but I would not over weight Canada.

Sure, things can go wrong anywhere. I wasn't specifically talking about investing in Canadian stocks. I was actually talking about Canada becoming a financial refuge as Switzerland used to be (and still is, I guess, for some people).

You know, in the old days, if you wanted to preserve your capital, you opened an account in Switzerland because they had the reputation for conservative money management. Plus the country's stable democracy, rock solid currency and low deficits always attracted those who were seeking ultimate capital preservation in the eye of the storm.

I was wondering if Canada, a country which seems to share many of these attributes, could become a refuge for Americans seeking capital preservation at a time when the US is facing major deficits, risks of currency devaluation and a teetering banking system. I have already heard people buying Canadian gold coins and storing them in safety deposit boxes at Canadian banks. I know that, if I lived anywhere close to the Canadian border, I'd probably open an account in one of their fine banking institutions and store some of my money there.

 

[spazz]

In Canada we have the CMHC, which insures mortgages and is a government agency. They take a pretty sizeable (1-3% I believe) premium on all mortgages that have less than 20% down.

The govt. also restricts what types of assets CDN banks are allowed to hold on their books.

BTW
Royal Bank of Canada just reported CDN $1 billion profit this past Q, with CIBC reporting CDN $780 million. Not too shabby considering the times

 

[Tempesta]

I agree there is plenty of blame to go around. But if Canada was different, why?

-ERD50

Strict regulations and being conservative

In real-estate industry
- Sub-prime mortgage is almost non-existence
- foreclosure in Canada is almost unheard of


In financial industry
- There's no such thing as investment bank in Canada. All of their banks are commercial banks with investment banking division. And these commercial banks have fat deposit.
- The banks are conservative in regard to their deposit-to-credit ratio.

 

[pedorrero]

I may be wrong, but i think it is also notable that many countries, such as Switzerland and (maybe) Canada, have little or NO government insurance for their banking system. By the way, another [former] money haven, De Bahamas Mon, was one place where mortgages were hard to come by. I remember on a bus tour, that the half-built homes were not abandoned, but de guide said that the stingy bank would only loan de homeowner enough to build one level at a time, mon. I haven't heard of any Bahamas banks in trouble lately either. Ah, but no loans, no fees, and no fees, bankers and their kin don't make any money. And we couldn't let that happen to our politically connected friends, could we?

 

[spazz]

I may be wrong, but i think it is also notable that many countries, such as Switzerland and (maybe) Canada, have little or NO government insurance for their banking system

Actually there is CDIC insurance - up to $100,000 per deposit (restrictions apply). They collect premiums from each chartered bank operating in the country.

 

[wolfbay]

We spent 2 months in Canada this summer &it's a beautiful country and we met a lot of nice people.The banks may be sound but the economy is inextricably tie to ours. About 80% of exports went to the US.Of course if gold and oil go through the roof(possibility if the dollar crumbles) Canada would be better off than the US.

 

[Meadbh]

In 2005 I inherited of Irish property and US funds. After a careful review and risk analysis, I decided to move the assets to Canada, where I live. I had been feeling sorry for myself because of market downturns, but now, looking at the state of the banking systems in both Ireland and the US, I'm so glad I made the moves I did!

 

[Gardnr]

Here's an interesting article/editorial about Canadian banks written by Canadian correspondent:

http://www.nytimes.com/2009/02/28/opinion/28tedesco.html?th&emc=th

Let's hope we get back to good old boring banking practices soon.

 

[Meadbh]

Yup, that's my bank....

reportonbusiness.com: Scotiabank profit climbs to $842-million

 

[Ed_The_Gypsy]

(In Canada) The govt. also restricts what types of assets CDN banks are allowed to hold on their books.

THIS is where the US went terribly wrong. Regulation has its place, IMHO. When Greenspan and friends decided that regulation was an unwarranted restriction on the creative energies of financiers and capitalists, we were doomed.

It is interesting to note that after the Canadian govt lowered the interest rates, my bank, TD Canada Trust, increased the rates on my line of credit 1.5%.

It is also interesting that there are a barrage of advertisements on 660 AM radio (news, traffic, weather and business) here in Calgary for home equity loans. The public here doesn't seem to realize how dangerous this is.

Ed

 

[ERD50]

Here's an interesting article/editorial about Canadian banks written by Canadian correspondent:

http://www.nytimes.com/2009/02/28/opinion/28tedesco.html?th&emc=th

Let's hope we get back to good old boring banking practices soon.

Apparently, some of the US banks are doing just fine, probably with " good old boring banking practices".

Northern Trust (NTRS) has been profitable for every quarter that my chart showed ( 4 years, beating estimates for 12/16 Qs). Their stock has not gone anywhere near zero, still trading at ~ 60% of its 5 year PEAK.

But the Democrats in Congress wrote them a letter admonishing them and demanding they change their business practices. I guess making money, being stable, not asking for a bailout, and trying to attract new and keep old customers is just not the way Congress thinks banks should operate.

For your reading pleasure:

Northern Trust's Golf Sponsorship: Good Use of Company Resources -- Seeking Alpha

Northern is extremely well-capitalized and does not possess anywhere close to the same credit risk as other large banks. (At year end, Northern’s nonperforming asset ratio was 0.33% vs. an average of 1.87% for the 20 largest banking companies. In addition, its net loan chargeoff ratio for all of 2008 was 0.22%, vs. 1.51% for its peers.)

The company participated in TARP money because it was asked to by the government, not because it had to. The U.S. Treasury’s involvement with Northern consists of a $1.5 billion investment, via a $1.5 billion preferred carrying a 5% annual dividend. It is not a subsidy. It is not a handout.

Barney Frank ... responded that “if they didn’t want the money, and didn’t need the money, then pay the money back.”

If only. Congressman Frank, there is nothing in the world Northern Trust’s management would rather do than give the money back, but the U.S. Treasury can’t even explain to the company, or other banks in a similar situation, how they can. Think I’m making this up? Go to the Treasury’s web site. To pay back their TARP investments, banks like Northern Trust must notify their primary regulator--and then wait for them to respond.


Congressman Frank, if you really want to help, and not just bluster, force the Treasury to issue simple guidelines on how banks can return their TARP funds. If you’re not going to do that, stop telling banks like Northern Trust to “pay the money back.”

Northern Trust says it plans to repay bailout fund as quickly as possible - Los Angeles Times

-ERD50

 

[Gardnr]

Apparently, some of the US banks are doing just fine, probably with " good old boring banking practices".

Yeah, I know. I didn't really mean to imply that all US banks had acted like BAC, Citi, etc. Just generally. It's been tough at times for those who didn't follow the siren song of higher profits based on risky (and insane) business practices. I'm glad that those responsible ones are going to prosper in the future from a solid foundation.

Sorry for the generalization.

 

[ERD50]

Yeah, I know. I didn't really mean to imply that all US banks had acted like BAC, Citi, etc. ....

Sorry for the generalization.

Oh no problem - I didn't even mean to imply you were generalizing.

I just thought it was interesting that there are exceptions, there are some stable prosperous US banks, yet, the administration is telling *these* banks to change their business practices. Ironic.

-ERD50