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Canada rated world's soundest bank system: survey

Thu Oct 9, 2008 2:41pm EDT

By Rob Taylor

CANBERRA (Reuters) - Canada has the world's soundest banking system, closely followed by Sweden, Luxembourg and Australia, a survey by the World Economic Forum has found as financial crisis and bank failures shake world markets.

But Britain, which once ranked in the top five, has slipped to 44th place behind El Salvador and Peru, after a 50 billion pound ($86.5 billion) pledge this week by the government to bolster bank balance sheets.

The United States, where some of Wall Street's biggest financial names have collapsed in recent weeks, rated only 40, just behind Germany at 39, and smaller states such as Barbados, Estonia and even Namibia, in southern Africa.

The United States was on Thursday considering buying a slice of debt-laden banks to inject trust back into lending between financial institutions now too wary of one another to lend.

The World Economic Forum's Global Competitiveness Report based its findings on opinions of executives, and handed banks a score between 1.0 (insolvent and possibly requiring a government bailout) and 7.0 (healthy, with sound balance sheets).

Canadian banks received 6.8, just ahead of Sweden (6.7), Luxembourg (6.7), Australia (6.7) and Denmark (6.7).

UK banks collectively scored 6.0, narrowly behind the United States, Germany and Botswana, all with 6.1. France, in 19th place, scored 6.5 for soundness, while Switzerland's banking system scored the same in 16th place, as did Singapore (13th).

The ranking index was released as central banks in Europe, the United States, China, Canada, Sweden and Switzerland slashed interest rates in a bid to end to panic selling on markets and restore trust in the shaken banking system.

The Netherlands (6.7), Belgium (6.6), New Zealand (6.6), Malta (6.6) rounded out the WEF's banking top 10 with Ireland, whose government unilaterally pledged last week to guarantee personal and corporate deposits at its six major banks.

Also scoring well were Chile (6.5, 18th) and Spain, South Africa, Norway, Hong Kong and Finland all ending up in the top 20.

At the bottom of the list was Algeria in 134th place, with its banks scoring 3.9 to be just below Libya (4.0), Lesotho (4.1), the Kyrgyz Republic (4.1) and both Argentina and East Timor (4.2).

RANKINGS

1. Canada
2. Sweden
3. Luxembourg
4. Australia
5. Denmark
6. Netherlands
7. Belgium
8. New Zealand
9. Ireland
10. Malta
11. Hong Kong
12. Finland
13. Singapore
14. Norway
15. South Africa
16. Switzerland
17. Namibia
18. Chile
19. France
20. Spain
--------------------------------------------
124. Kazakhstan
125. Cambodia
126. Burundi
127. Chad
128. Ethiopia
129. Argentina
130. East Timor
131. Kyrgyz Republic
132. Lesotho
133. Libya
134. Algeria

SOURCE: World Economic Forum Global Competitiveness Report 2008-2009.
 
MADEinHK said:
Canada rated world's soundest bank system: survey

Thu Oct 9, 2008 2:41pm EDT

By Rob Taylor

CANBERRA (Reuters) - Canada has the world's soundest banking system, closely followed by Sweden, Luxembourg and Australia, a survey by the World Economic Forum has found as financial crisis and bank failures shake world markets.

But Britain, which once ranked in the top five, has slipped to 44th place behind El Salvador and Peru, after a 50 billion pound ($86.5 billion) pledge this week by the government to bolster bank balance sheets.

The United States, where some of Wall Street's biggest financial names have collapsed in recent weeks, rated only 40, just behind Germany at 39, and smaller states such as Barbados, Estonia and even Namibia, in southern Africa.

The United States was on Thursday considering buying a slice of debt-laden banks to inject trust back into lending between financial institutions now too wary of one another to lend.

The World Economic Forum's Global Competitiveness Report based its findings on opinions of executives, and handed banks a score between 1.0 (insolvent and possibly requiring a government bailout) and 7.0 (healthy, with sound balance sheets).

Canadian banks received 6.8, just ahead of Sweden (6.7), Luxembourg (6.7), Australia (6.7) and Denmark (6.7).

UK banks collectively scored 6.0, narrowly behind the United States, Germany and Botswana, all with 6.1. France, in 19th place, scored 6.5 for soundness, while Switzerland's banking system scored the same in 16th place, as did Singapore (13th).

The ranking index was released as central banks in Europe, the United States, China, Canada, Sweden and Switzerland slashed interest rates in a bid to end to panic selling on markets and restore trust in the shaken banking system.

The Netherlands (6.7), Belgium (6.6), New Zealand (6.6), Malta (6.6) rounded out the WEF's banking top 10 with Ireland, whose government unilaterally pledged last week to guarantee personal and corporate deposits at its six major banks.

Also scoring well were Chile (6.5, 18th) and Spain, South Africa, Norway, Hong Kong and Finland all ending up in the top 20.

At the bottom of the list was Algeria in 134th place, with its banks scoring 3.9 to be just below Libya (4.0), Lesotho (4.1), the Kyrgyz Republic (4.1) and both Argentina and East Timor (4.2).

RANKINGS

1. Canada
2. Sweden
3. Luxembourg
4. Australia
5. Denmark
6. Netherlands
7. Belgium
8. New Zealand
9. Ireland
10. Malta
11. Hong Kong
12. Finland
13. Singapore
14. Norway
15. South Africa
16. Switzerland
17. Namibia
18. Chile
19. France
20. Spain
--------------------------------------------
124. Kazakhstan
125. Cambodia
126. Burundi
127. Chad
128. Ethiopia
129. Argentina
130. East Timor
131. Kyrgyz Republic
132. Lesotho
133. Libya
134. Algeria

SOURCE: World Economic Forum Global Competitiveness Report 2008-2009.
Click to expand...


Too bad it didn't translate to a bounce in the financial sector today.

Banks here should be ok as long as they don't break the first rule of banking....."never lend to those that need it !".
 
Ottawa admits it must act on the economy

Ottawa admits it must act on the economy

BRIAN LAGHI , HEATHER SCOFFIELD and STEVE CHASE AND TARA PERKINS
Globe and Mail Update
October 9, 2008 at 10:48 PM EDT

http://www.theglobeandmail.com/servlet/story/RTGAM.20081009.wbankpolitics10/BNStory/Business

OTTAWA, RICHMOND, B.C. and TORONTO — The federal government is moving to backstop the Canadian banks' capacity to lend money in an acknowledgment that not even the country's sturdy banking system is immune to the global financial crisis.

A plan originally earmarked for Friday morning would see the government assume some mortgages currently held by the banks by giving them to the Canadian Mortgage and Housing Corp., a Crown corporation. In turn, the banks might receive CMHC paper – possibly bonds – against which they could use as collateral for their own loans from other banks.

In recent weeks, the big banks have faced a sharp rise in the cost of borrowing money in international markets to cover Canadian mortgages – a situation that puts them at risk of losing ever-increasing amounts of money on one of their core businesses.

Prime Minister Stephen Harper, Finance Minister Jim Flaherty and the banks say no bailout is on the table and the plan falls short of an intervention, but sources told The Globe and Mail Ottawa now recognizes the fast-changing economic landscape requires action to help the banks access cheaper funds to fuel lending.

With the double whammy of the last days of an election combining with the global economic slowdown, the federal government and senior bank executives are hypersensitive. The Conservative Party has been insisting throughout the election campaign that the fundamentals of the economy are strong. But in the past 24 hours a new reality has set in.

Mr. Flaherty, who is expected to be in Washington Friday at an emergency G7 session of finance ministers, had been preparing to make the announcement of a banking plan Thursday, but after word leaked Wednesday night, the plans were delayed, sources say, in an illustration of how important it is for the government to try to control the message.

Pressure from the banks is growing, with executives arguing their sector needs federal help immediately to ease their credit pressure.

Banks want it right now but the Harper government has to reconcile calls for immediate assistance with its insistence the Canadian banking system requires no extraordinary measures.

Financial stocks were battered Thursday. Toronto-based insurers Sun Life Financial and Manulife Financial fell 13.96 per cent and 11.35 per cent, respectively. Bank of Montreal dropped 4.59 per cent, Toronto-Dominion Bank 6.42 per cent, Bank of Nova Scotia 7.15 per cent, and both Royal Bank of Canada and Canadian Imperial Bank of Commerce fell 9.01 per cent. Comparatively, the S&P/TSX composite fell 4.54 per cent.

The Conservatives have watched their lead in the polls shrink over the past two weeks as financial turmoil boils over. Mr. Harper had argued that the economy is strong enough not to require urgent action, and that the stock-market plunge was a buying opportunity. That messaging has come to an end, however, as the Conservatives try to appear more sympathetic in helping put an end to the turmoil. As the election campaign comes to its conclusion, Mr. Harper has argued that Canadians should re-elect the Conservatives because they are the steadiest hand in guiding the turbulent economy.

Asked Thursday whether the government is working on a plan to help the flow of funds to borrowers by expanding mortgage security, Mr. Flaherty confirmed that “yes, we are looking at additional steps that could be taken.â€

In British Columbia Thursday, Mr. Harper defended the idea of extending a helping hand. “To be very clear: there is no question, no possibility of bailing out the banks and the banks aren't seeking to be bailed out and the government won't be bailing them out,†he said. He added, however, that the banks need help to cope with the “growing tightness in world credit markets†now. “We're doing that to make sure there's money available for routine loans [for] small business, for car loans, for mortgages.â€

But his main rival for the prime minister's job dismissed Mr. Harper for acting too late.

Asked if it was appropriate for the government to be intervening, Liberal Leader Stéphane Dion said it's the Tories who are panicking.

“It's too little, too late for Mr. Flaherty and Mr. Harper,†Mr. Dion said. “They have no plan. It's too late for them.â€

The Tories have been facing increasing criticism this week for their handling of the crisis.

On Thursday, an executive said he was “shocked†when Mr. Flaherty said that two Canadian banks had run the risk of falling outside Canada's capitalization requirements.
 
YAY!! Canada!!

This is the kind of news we need in times like this. We take anything we can get to hold our confidence steady!

All our largest banks are commercial banks who are rich in cash and deposit. As long as they maintain good loan-to-deposit ratio, they should be fine.

can someone provide some linky, I wanna brag!
 
cdr108 said:

On Thursday, an executive said he was “shocked†when Mr. Flaherty said that two Canadian banks had run the risk of falling outside Canada's capitalization requirements.
Click to expand...


Regarding the two financial institutions, that matter was dealt months ago, per this article,

http://www.thestar.com/Business/article/514549

My guess is that those two are Sun Life and ManuLife as they have the biggest exposures to financial crisis in the U.S. As far as our commercial banks, where most of our loans, mortages, credits come from, they all enjoy the highest credit ratings in the world

TD = AA-
RBC = AA-
Scotiabank = AA-
CIBC = A+
BMO = A+
 
The problem with the States mortgage problem is the zero down mortgages they had. A customer would put as low as $0.00 as the down payment, and the rest would be a mortgage. The theory was that if the customer defaulted, the mortgage company would then sell the property to cover the remaining mortgage. This was fine where the housing market experiences ever increasing house prices. If the customer bought a $200,000 house at zero down, then defaulted, the mortgage company would then sell the house at the new market price, which usually was higher, say $250,000. The mortgage company got their money back, plus costs.

However, now the price of houses in the states were going down. When the customer defaulted, the mortgage company couldn't sell the house to cover the amount of the mortgage. That $200,000 house is now worth $175,000 and is lower than the mortgage the customer took out. The mortgage companies don't want to have a mortgage that is higher than the current price of a house, which is where the problem lies.

This is especially bad in the suburbs of the U.S. where the cost of living is higher than in the urban areas, because of the higher oil prices. It is harder for them to save or pay off the mortgage if more money is going to fuel either their homes or cars, instead of lowing their mortgages.
 
W. K. Lis said:
The problem with the States mortgage problem is the zero down mortgages they had. A customer would put as low as $0.00 as the down payment, and the rest would be a mortgage. The theory was that if the customer defaulted, the mortgage company would then sell the property to cover the remaining mortgage. This was fine where the housing market experiences ever increasing house prices. If the customer bought a $200,000 house at zero down, then defaulted, the mortgage company would then sell the house at the new market price, which usually was higher, say $250,000. The mortgage company got their money back, plus costs.

However, now the price of houses in the states were going down. When the customer defaulted, the mortgage company couldn't sell the house to cover the amount of the mortgage. That $200,000 house is now worth $175,000 and is lower than the mortgage the customer took out. The mortgage companies don't want to have a mortgage that is higher than the current price of a house, which is where the problem lies.

This is especially bad in the suburbs of the U.S. where the cost of living is higher than in the urban areas, because of the higher oil prices. It is harder for them to save or pay off the mortgage if more money is going to fuel either their homes or cars, instead of lowing their mortgages.
Click to expand...

Everyone knows about what you just explained. That conversation is over 10-12 months ago.

The issue now is the repercussion. massive debt --> failing banks --> government/inter-banks bail-outs --> investors lose money, pulling money out --> drying up pool of money --> credit freeze --> economy stops! Imagine when you can't borrow money for business, credit cards, mortgages. Even banks don't wanna give credits to other banks.Practically put the economy to a complete stop.

Now going back to Canadian banks why they are stronger than other banks, because they are not investment banks, they are commercial banks. They don't rely on that dried-up pool of money to give people loan. They rely on the deposit average people, like u and me, make into our accounts. So they use people money to back loans they give to others. That's the foundation of banking.

Commercial banks are generally stronger, HSBC, Standard Chartered, TD, RBC, BMO, CIBC, Credit Suisse, JPMorgan, Wells Fargo are all commercial banks. Compared to commercial banks from other countries, Canadian banks are more conversative, and on top of that Canada has stricter credit regulation than other countries like UK or US.

That's why Canadian banks are in the strongest position
 
W. K. Lis said:
This is especially bad in the suburbs of the U.S. where the cost of living is higher than in the urban areas, because of the higher oil prices.
Click to expand...

Actually, the cost of living is much cheaper in the suburbs of the US (housing, food, insurance, energy, etc.)... the only way one would pay more for gas is if they had a very long, multi-hour commute from an extreme suburb or rural area to a downtown metropolis. And, in that case, the increased cost of gas still doesn't even come close to the savings a suburbanite would see in all other areas.
 
If things keep going like this, Toronto could very well take over New York & London as the financial capital of the world. Now wouldn't that be something!
 
Well I don't know if we will ever be up there with NY and London, but our reputation must be going up (relatively speaking). We are going to come out of this mess looking better than many other countries.
 
lowesthangingfruit said:
Word is the numbers are skewed because of those jobs are part time positions related to the upcoming election. Will have to see the over all trend when the election is done with and into the holiday seasons. Cross your fingers.
Click to expand...

97,000 of those 107,000 new jobs were part-time.

Having said that, an employment increase of 10,000 full-time jobs is nothing to sneeze at.
 
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