The Bankwatch

Tracking the consumer evolution of financial services

Archive for the ‘Canada’ Category

CIBC release first Canadian bank iphone app

It was October 2009 when I posted ‘who will be the last bank without an iphone app’.

For Canada I should have said who will be first, and its been a long time coming but it is CIBC.  After an initial delay in December, it is released today.  No bill payment yet, but it does have EMT (Canadian p2p payments between participating banks).

Kudos to CIBC.


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Written by Colin Henderson

February 2, 2010 at 21:41

Posted in Canada

The impact of global fiscal stimulus is good for Canada | Bank of Canada

Canada has been receiving kudos for a job well done throughout the crisis of the lest 2 years.  This analysis from Bank of Canada has a telling paragraph (highlighted) that suggests there are good classic economic reasons for Canada being where it is, and over-confidence would be a bad idea.

The Power of Many:  Assessing the impact of Global Fiscal Stimulus | Bank of Canada

Table 4 shows that, on a regional basis, the United States, as a large and relatively less open region,
benefits the least from a global stimulus. Moreover, the impact of different measures depends on its
trade patterns. The United States is a net exporter of investment goods and commodities other than oil, but a net importer of consumption goods and oil. The United States therefore benefits more from a global stimulus when global demand is slanted towards its comparative advantage in trade (e.g.,
investment goods). Japan also has a relatively closed economy, but its trade patterns are somewhat
different: it is a large net exporter of consumption and investment goods, and an importer of oil and
commodity goods.

In contrast, Canada is a small open economy and a net importer of investment and consumption goods, but a net exporter of oil and commodities. As such, it profits greatly from the global stimulus (Table 4), the multipliers being twice as large as in the case of an isolated stimulus, owing in part to a substantial improvement in its terms of trade derived from the increase in oil and commodity prices. For similar reasons, the commodity-exporting region also benefits from a global stimulus.

Emerging Asia is highly open to trade, a net importer of oil and commodities, and a large net exporter of consumption goods (Table 4). Thus, it experiences contradictory forces to its terms of trade under a global stimulus. Moreover, the presence of a large contingent of non-Ricardian agents results in almost no change in private consumption and investment under a fiscal stimulus, either local or global. The remaining countries benefit less from a global stimulus, owing to the large size of this region (39 per cent of global GDP).

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Written by Colin Henderson

January 27, 2010 at 18:32

Posted in Canada, economy

Consumer mindsets in North America have shifted permanently with regard to finances

After my last post, I thought it better to follow up with some facts to support my contention that this economic recovery is L shaped in Canada and US.  This is not meant to be an economic projection, and I leave that to the professional economists.  However in terms of planning, banks ought to consider the high probability of a scenario where the reduction in economic activity will level off but hardly see growth in the near future.  This will be driven by consumer confidence and frankly their financial circumstances.

If we go back to the root cause of the recession it remains this;   a dramatic drop in consumer asset values resulting in leverage that is too high.  Layer in the concern about job security, and the real increase in unemployment, we must look carefully at ability to manage the debt based on current income, and the effect of that on the business of banking.

Here is the ratio of debt to disposeable income in Canada and US at end of 2008. [source: CGA Association Canada & Federal Reserve Bank of San Francisco]

Canada              US

%                                  136.5%             130%

The first surprise is that Canadians are more highly levered than Americans.  The CGA report makes these points amongst others:

… prospects of improving households’ financial situation in the near future are low. A balanced approach to spending, saving and paying down debt may be a desirable feature of households financial behaviour in the near future.

Hardly earth shattering stuff but the consequences remain that strategies need to account for this new consumer mindset in North America for the next few years.

Written by Colin Henderson

June 22, 2009 at 14:47

Countries that are least affected by the Economic Crisis

An interesting survey of business reaction to the crisis, and which countries are least impacted.  Full ranking follows the map.  This explains a lot in terms of peoples reactions.

Time will tell if this reaction remains constant, and what were the contributors to and rivers of this reaction.


Countries that are Least Affected by Recession | digital inspiration

The data is based on the results of a business confidence survey that was done on international business people of 24 nations to identify which countries they believe are surviving the crisis the best.

Researched by Nobuyo Henderson


Written by Colin Henderson

May 31, 2009 at 21:11

Canadian banks will require more capital to remain within targets

The IMF have released their working papers following their analysis of Canadian Banks.  Notwithstanding the positive comments about Canadian banks financial position entering the crisis, there remains potential for a requirement for increased capital as negatives in Canada could decrease bank capital by 2.5% – 3.5% over next year or two.

The IMF employed the American stress test approach to Canadian banks in this exercise.

Here is the current position:

can banks IMF

There are two ratios being watched – Tier 1 and Total Capital.  In a nutshell and worst case scenario, IMF are saying if 2.5% or 3.5% is taken off either ratio, most banks risk being below the Canadian targets shown at the foot.

The potential negatives on bank capital were recognised as:

  1. Western Canada house values having some more downward corrections anticipated.  Eastern Canada is about right in their view.
  2. collapse of auto sector
  3. variances in commodity prices
  4. continued high unemployment

The external influences on Canada are summarise in this graphical story line.  Here is the full paper.  Canada: 2009 Article IV Consultation—Staff Report cr09162

can external imf1

can external imf2

Written by Colin Henderson

May 25, 2009 at 10:37

Posted in Canada, economy

Tagged with

What makes Canadian Banks different in this crisis? | OECD

This 21 page document reviews the circumstances prior to the crisis of Canadian Banks and other OECD Banks.  The relative abundance of retail deposits (compared to more volatile wholesale deposits)  seems to have been key for the resilience of Canadian banks, supplemented by a risk averse financial culture.

The differences from the summary were as follows – Canadian Banks were:

  1. better capitalised
  2. Capital ratios before the crisis were a key determinant of bank performance
    during the turmoil; and Canadian banks had ample capital

  3. more liquid
  4. Compared to OECD peers, Canadian banks had slightly above-average balance
    sheet liquidity

  5. enjoyed relatively more retail deposits
  6. During a liquidity crisis, access to stable funding is key to survival; Canadian
    banks had a high ratio of retail to wholesale deposits

In addition and as discussed here before, the risk tolerance in Canada is much lower than elsewhere, and this manifests across several areas, highlighted in the report.

7. Regulatory and structural factors contributed to the resilience of Canadian banks by reducing their incentives to take risks. Canadian capital requirements are significantly more stringent than Basel minima (national targets of 7 percent for tier 1 capital and 10 percent for total capital,  versus 4 and 8 percent prescribed by the Basel Accord).

Banks are also subject to a maximum assets-to-total-capital multiple of 20 (corresponding to a leverage ratio of 5 percent). Besides providing an enhanced cushion, stringent capital requirements have beneficial incentive effects: they impede rapid balance sheet growth, restrict wholesale activities, and limit foreign expansion to niches where banks have clear competitive advantage not related to low cost of capital.

Notable structural factors in Canada include high franchise values, a mortgage market characterized by prudent underwriting, and an overall prudent and conservative culture in the financial sector. Limited exposure to U.S. assets was a key additional factor behind the resilience of Canadian banks to the crisis.

Canada: Selected Issues | OECD

Written by Colin Henderson

May 22, 2009 at 20:17

Posted in Bank+of+Canada, Canada

Speculation mounts about Virgin next move for banking in Canada

There appears to be little more than speculation, and floating of ideas here, but nonetheless Virgin have just announced intention to launch a direct bank in UK, and Branson has noted his broad intention to get more involved in financials services.

Something to keep our eyes on.  A move such as this is good for financial services, and good for the broader industry including system vendors, such as my friends at SIT, because any new set up will need the flexibility of a web based approach coupled with solid banking and investment systems.

Virgin’s next chapter: Is now the time to bank in Canada? | Globe and Mail

In the contrarian view of Sir Richard Branson’s conglomerate, today is an opportune time to start a bank. And after floating the idea publicly more than a year ago of launching a Web-based bank for Canadians, Virgin is close to making a final decision, following news last week that it is selling its stake in Virgin Mobile Canada to BCE Inc.’s (BCE-T) Bell Mobility.


Written by Colin Henderson

May 21, 2009 at 09:57

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