Is Tangerine a sound bank? | Page 2 | Tangerine Bank | Discussion forum

COIN said

I thought ING parent went insolvent and that was why they had to sell ING Canada back when.

Not true.

ING Bank N.V. had received around €10 billion of aid from the Dutch government in the 2008 Great Recession. It became time for them to start paying the Dutch government back. By 2012, about €3 billion was left to be repaid.

Far from bankrupt, ING Bank N.V. had a DBRS debt rating of AA(low) in January 2012. The sale of ING Bank of Canada to Scotiabank wasn't announced until August that year.

That's right: ING Bank N.V. had to be bailed out. ING Bank of Canada was fine.

ING Bank N.V.'s assets were more than their liabilities. So, they were solvent. But, their capital levels didn't meet minimum levels.

I think their regulatory capital fell to around 6% of their loans and other assets. The minimum was 8%.

RetirEd said
I was quite satisfied with ING before the buyout. Then the Tangerine sleazy fees and gaming began. And, being launched before the internet banking craze, ING had amazing customer service and free monthly mailed statements.
RetirEd.  

I joined ING years ago too. They were great and enabled easy daughter-in-school funding via joint accounts.

TNG's usually slow and frequently unintelligible and unintelligent Customer Service is a PIA but I don't mind 5-5.25% HISA's with easy in/out transfers ...

Norman1 said
There are no current debt ratings for Tangerine Bank.

The DBRS ratings for it were discontinued in September 2013 while it was still named ING Bank of Canada and shortly after ING Group reached an agreement to sell it for $3.1 billion to Scotiabank.

Tangerine Bank's lack of a rating is in stark contrast to its Scotiabank siblings ADS Canadian Bank, Montreal Trust Company of Canada, National Trust Company, and Scotia Mortgage Corporation, which all have a AA DBRS debt rating.  

I have gone back and forth on the importance, or lack of importance of, a DBRS rating in terms of assessing a bank's financial "soundness." I'm currently in the "it's not very important" camp.

Debt ratings agencies' ratings are always lagging indicators; they look at the publicly available data, or certain aspects of it, and extrapolate based on the known knowns. What they don't necessarily know are the known unknowns and unknown unknowns. They're also terrible at predicting what would happen in a Black Swan-like event. Consider Silicon Valley Bank earlier this year, or the 2008 financial crisis, and their ratings on the likes of Merrill Lynch & Co., Bear Stearns & Co., and Lehman Brothers, Inc. Consider their ratings on American International Group, Inc.

At the end of the day, they are paid by investment banking firms and firms looking to market and sell debt or debt-like instruments to various types of investors. They need to show some level of due diligence has been done, but it's not necessarily relevant nor helpful to Joe Depositor looking to buy a GIC.

Is Scotiabank responsible for Tangerine Bank or obliged to help it out? No. But what is Tangerine Bank's business mix? It has almost no mortgages, so there is almost no credit risk in the bank. Is there potential liquidity risk? Perhaps, like any bank, but what is the average deposit size? (The OSFI financial returns are very opaque and do not provide this level of detail, which is why I believe we should lobby the federal government to implement requirements for all federally-regulated financial institutions, publicly-traded and privately-held, to post full audited financial statements annually and unaudited financial statements quarterly.) What is the duration of their deposits? How much is in short- and long-term investments? How likely is a bank run? Do they have daily withdrawal limits to limit the effect of a bank run? How likely is a bank run? In that context, Tangerine is nothing like Silicon Valley Bank. They don't have a maximum deposit size, so that might be a slight risk, whereas EQ Bank and Alterna Bank cap per depositor balances at like $250,000-500,000 for precisely that reason, to limit the possibility of a bank run.

On the other hand, Tangerine Bank is immensely profitable and a source of capital for Scotiabank. It generates $500 million to $1 billion in after-tax profit for Scotiabank, which they can retain as earnings, bolstering Tangerine's regulatory capital, or they can pay it as a healthy dividend to Scotiabank, which, in turn, feeds Scotiabank shareholders' dividends.

Overall, it's a very low risk bank.

Cheers,
Doug