EQ Bank Launched - 3% Interest Rate (For now?) | Page 4 | EQ Bank | Discussion forum

mechone said

Question , would you deposit more then the CDIC limit ? It is a bank and must pass government stress test right?

Equitable Bank currently has a DBRS credit rating of BBB(low). I think the answer depends on how one feels about investing money into something with that rating.

Pardon my skepticism, but banking is serious business as are my funds, so I look at this in the most pessimistic way possible.

No joint account (when a spouse dies, how do you assess your chances to get money from these people easily?), $ 30k ETF withdrawal limit (what, on a savings account?), poor DBRS rating, goofy clown from the McDonalds commercial fronting for them in a TV ad but more relevant than that, the cost of TV advertising AND paying out 3% on deposits at the same time, savings deposits at that, and where are they going to place these funds profitably (impossible) = losing money.

I guess the biggest thing that bothers me is a bank that, to me, is not being honest. " The 3% interest rate is not a promotional rate ". I call BS. I remember well, as many of you will, how Canadian Tire years ago at the early days of TFSA had a good TFSA savings rate and then 3 months later as they had your money for the year because of TFSA government withdrawal and redeposit rules, dropped the rate to an noncompetitive level when nobody else was dropping rates. So the following year after that, they created a good rate again and made sure everyone saw them say "this is not a promotional rate" with a "!" added. Guess what, 3 months later, same thing they dropped the rate when nobody else was dropping rates!

Ask yourself, do you think this is the same act, or is it worse? I wonder how CDIC is viewing this latest massive change to business operations of one of the banks it covers.

dougjp said

Pardon my skepticism, but banking is serious business as are my funds, so I look at this in the most pessimistic way possible.

No joint account (when a spouse dies, how do you assess your chances to get money from these people easily?), $ 30k ETF withdrawal limit (what, on a savings account?), poor DBRS rating, goofy clown from the McDonalds commercial fronting for them in a TV ad but more relevant than that, the cost of TV advertising AND paying out 3% on deposits at the same time, savings deposits at that, and where are they going to place these funds profitably (impossible) = losing money.

I guess the biggest thing that bothers me is a bank that, to me, is not being honest. " The 3% interest rate is not a promotional rate ". I call BS. I remember well, as many of you will, how Canadian Tire years ago at the early days of TFSA had a good TFSA savings rate and then 3 months later as they had your money for the year because of TFSA government withdrawal and redeposit rules, dropped the rate to an noncompetitive level when nobody else was dropping rates. So the following year after that, they created a good rate again and made sure everyone saw them say "this is not a promotional rate" with a "!" added. Guess what, 3 months later, same thing they dropped the rate when nobody else was dropping rates!

Ask yourself, do you think this is the same act, or is it worse? I wonder how CDIC is viewing this latest massive change to business operations of one of the banks it covers.

Sorry my comment self deleted on my iPad when I did a smiley.

Personally, I don't care about credit ratings but I would never exceed the $100,000 CDIC limit (maybe we should start a lobby group to get that raised, it's been the same for a while). We set up, wherever we can, 3 accounts: one for me, one for my wife, one joint, so that way we can have a balance of $300K (for us that's more than enough to keep in one institution, no matter the rate) with no worries. Over the years I've accumulated A LOT of "high interest" accounts (and that's just with banks, I have no business with credit unions), most have about $5 in them as I put my money wherever rates are best this particular day. Sometimes I do nothing with an account for a years, then a promo comes along and "we're back!" (for a while).
Not too worried about the $30K limit on ETF transfers, just do more than one transaction over a few days.
To me, interest rates by definition are "promotional" as they all move them up and down as their business needs and the markets demand and their fine print says the same for all of them in that regard, even during official promotion periods. I'm fully get that 3% today does not guarantee 3% next week, I'm not guaranteeing my money will be there next week.
For me, these ebank accounts are about one thing only, i.e. to get the highest interest possible today for my extra cash (and no TFSAs, RRSPs, etc) that I don't want to invest. I like them as my expectations are minimal, I don't care about all their other features as I use a bricks-and-mortar big-five bank for my daily banking and as a conduit for my "high" interest account shenanigans.

reality, if you've got $300K to throw in a bank account and no wife, you've got zero reason to have bad nerves, you're laughing! Except for trying to keep potential wives or partners away! Want to trade lives?!
And re the bank rating agencies - didn't some of them have egg on their faces when all heck broke loose a few years ago? So I guess that could be another risk factor.
But if you're the nervous type (I would be too if $200K over the CDIC limit) then I guess you'll have to decide if the incremental interest, after tax, is worth the nervous times. Or maybe you can open joint accounts with people you absolutely trust (Mom, etc?) to get more CDIC coverage - though I'm sure you know this can be a terrible idea for various reasons.

Thanks for the feed back .I'm in the same boat as reality. I have 250 in CDF and 150 in peoples trust and another 100 in outlook I was thinking of moving the 250 out of CDF as Alberta is falling to pieces.

reality said

Is there a way I could get ratings for Canadian banks along with explanations? I have been following these boards for years but just finally registered tonight. I was going to park a lot more than 100K in EQ and would appreciate rating info and such.

DBRS explains their ratings scale in their document Long-Term Obligations Rating Scale.

One can register on DBRS' site for free (non-trial) access to the current ratings.

Royal Bank, CIBC, and Bank of Montreal each currently have DBRS ratings of AA and AA(low).
TD Bank currently has DBRS ratings of AA, AA(low), and A(low).
National Bank has DBRS ratings of AA(low) and A(high).

EQ Bank (Equitable Group) is a publicly traded company. So all of its financial information is readily available.
In 2014 they had 100m+ in earnings and are on pace to do better than that in 2015 (Q4 earnings not yet released). They also have 1.67 dividend yield which has been growing for the past 5 years.
So it appears that they are a healthy well established company.

Bank ratings and CDIC insurance are not as comforting as they may on the surface seem - only some smaller Cdn banks have ever gone under (Northland Bank comes to mind as an example and it was taken over I believe by Royal) but the simple fact is that in the event one of the major Cdn banks went under, conditions would be such that there would not be enough money within the CDIC to pay out depositors - the question then becomes whether the Gov't of Canada would come to the rescue and that is not clear. It used to be thought that there was a more or less implicit guarantee the GOC would bail out a bank but recent changes in legislation including in particular the new "bail-in" provisions call into question what support the GOC would provide - so I kid myself in thinking that the $100k guarantee is my guarantee of safety and I never have more on deposit at any one bank but I often wonder if push came to shove whether that guarantee would be worth anything or if so, how much