Bank failures, bank runs and other musings | Page 6 | General financial discussion | Discussion forum

SVB was somewhat special in that it wasnt well diversified and grew fast but in other respects it was very normal and experienced problems any bank might. Not sure about any of these for Canadian banks, but on the face of it, our banks are unlikely to be immune.

1. One of the factors behind SVB failure was a post-2008 regulatory requirement to hold lots of safe bonds. SVB did. I assumes Canadian banks do as well.

2. As rates started to rise and price to market dropped, SVB was permitted to ignore market pricing and use nominal value of bonds. Is this common practice in Canada?

3. A massive run on cash happened very fast for a number of reasons. In theory, if an internet rumour (true or false) were to spread, it can happen to any bank.

4. This is normal in a rising rate environment. Lots of US banks went bust in a very similar manner in the early 80s. Canada has the same issue.

5. US government stepped in to remove the risk from banks and depositors to taxpayers. This may incentivize reckless future behaviour. Our government has not done so yet but there is an expectation that it would.

Overall, unless production can be ramped up fast, failures are expected and needed to subdue inflation. Thats what they are raising the rates for. So, we should expect some failures.

Credit Suisse has been a rogue bank for many years, involved in many global scandals and fined a number of times. It seems like CS was regularly in the news for all the wrong reasons. The final straw was when the Saudis refused to inject more capital into CS last week. What did they not like?

Bill said
Re my post #96, I've removed Tangerine from my list of places I'd exceed the CDIC limit, just Big 5 now.  

Why?

suburbs4life, just an abundance of caution, don't particularly feel good about the way our world (not just financial world) is going, probably just my age. Plus I don't really need the extra interest they're currently giving (especially considering my marginal tax rate) so it's a bit of a luxury for me.

RetirEd said
Hmmm.. If Tamgerine is owned and operated by Scotiabank, they have some pretty good backing. Not quite the same as Signature Bank's cryptocurrency business.

Bottom line - so far, nobody seems to have lost their deposits. Shareholders, not so much...
RetirEd  

Agree.
My confidence in Canadian banks is 99.99%. However, due to the 0.01% chance of a problem, it is in my best interest to spread the deposits among the FI's in order to be protected with the CDIC limits.
Remember, if you don't want to be in a Predicament, don't put yourself in a position where a Predicament could happen and affect you.

Patch002: Agreed. I keep between five and ten financial institutions on tap at all times. (Lack of precision for privacy's sake)
RetirEd

For those investing in Banks:

National Bank Presents List of ETFs to Help Investors Monitor Market Situation

12:09 PM EDT, 03/15/2023 (MT Newswires) -- National Bank on Tuesday presented a list of exchange-traded funds that investors can use to monitor the rapidly evolving situation amid the collapse of the Silicon Valley Bank and Silvergate bank.

Canadian ETFs with the least regional bank exposure include BMO Equal Weight Banks Index ETF (ZEB.TO), BMO Covered Call Canadian Banks ETF (ZWB.TO), iShares S&P/TSX Capped Financials Index ETF (XFN.TO), and Hamilton Canadian Bank Mean Reversion Index ETF (HCA.TO), to name a few.

The Canadian ETFs with the most regional bank exposure include BMO Equal Weight US Banks Index ETF (ZBK.TO), RBC U.S. Banks Yield Index ETF (RUBY.TO), BMO Covered Call US Banks ETF (ZWK.TO), and Harvest US Bank Leaders Income ETF Class A (HUBL.TO).

US ETFS with the least regional bank exposure include SPDR S&P Capital Markets ETF (KCE), Invesco KBW High Dividend Yield Financial ETF (KBWD), Gabelli Financial Services Opportunities ETF (GABF), and the iShares Global Financials ETF (IXG).