1. Publication: Jamaica Observer; Date: Oct 29, 2008; Section: Business Observer; Page: 31B
Safe banking the Canadian way
We must celebrate Canada's foresight, because just imagine if we had a Bear Stern, Merrill Lynch and
Wachovia here instead. I think we would have way more problems than we already do. So I thought it
would be charitable to lessen some of your anxiety by highlighting the safe houses Canadian banks are
presently providing. Although NCB ratings are down and it forecast lower than expected earnings, it
should still post above 20 per cent in profits and Scotia bank ought to be ahead by the year end. On a
whole, we could be much worse off with regards to our financial sector at this moment. If you are to bet
on financials right now, it would have to be one with Canadian origin.
Raul Haynes is a research analyst at
Stocks & Securities Ltd. e-mail:
rhaynes@gostocksandsecurities.com
THE gloom of the financial crisis has been a widely held topic for the better part of this year and I know readers must be exhausted with it by
now. Nonetheless, I must further delve into it but with more relevance to our shores and also some good news. In all the talk of a financial
crisis in the US and UK, have we really heard much about Canada? For us here in Jamaica Canada is very important. To begin with, most of
our major banks are all Canadian owned. Let’s list them: Scotia bank, RBTT (owned by Royal Bank of Canada), NCB (owned by Michael Lee
Chin's Canadian AIC) and FCIBC (Canadian Imperial Bank). So you see, Canada has tremendous influence on the Jamaican financial sector
and its good health is indeed vital to our livelihood here in Jamaica.
The good news is that Canadian banks seem to be smarter than their counterparts from Britain and the United States. Canada has managed
to steer clear of the bailout train and is paddling above murky waters that drowned banks in both the US and UK causing those governments
to inject billions in life support. It must be noted that we are approaching a global recession and evidently it will have some impact on
Canada’s economy, particularly with regards to consumer confidence. However, the degree to which Canada’s financial sector is affected when
compared to the US and UK is clearly far less.
In fact, Canadian banks are currently among the strongest and most trusted in the world. When comparing the financial services indices for
US, UK and Canada over the last year (HIs of 2007), it is evident why they are deemed financially superior. In the US the financial index is
currently at 346 points which is 52 per cent below the HI of 718 points, in the UK we used Lloyd’s Bank’s index before the HBOS takeover
(no comparative index) and the current level of 217 points represented an astounding 62 per cent drop below the year HI of 572 points. In
Canada, however, the current level of 182 points only meant a 19 per cent fall from the 2007 year HI of 225 points. Evidently, Canadian
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2. Financials have suffered the least bruises. No Canadian bank has filed for bankruptcy to this year.
The financial hurricane did not impact Canadian banks as harshly mainly because of the pre-empted work of the Canadian FED. In
September of 2007 before the Credit crisis and financial meltdown, Purdy Crawford was quoted saying “What we’re trying to do is save this
35 billion from a meltdown and destruction.” In a very complex manoeuvre they created CAD 35b held by smaller banks and investment
houses into accounts that were backed by hastily arranged lines of credit from Canadian banks. Crawford is acting as the lead negotiator for
resolution of the Canadian financial institutions’ crisis in Asset-Backed Commercial Paper, which was primarily caused by the collapse in the
subprime mortgage market in the United States in 2007. The outcome was an orderly shift away from those banks or investment houses
bankruptcies that led to the catastrophic domino effect around the world. Hence their exposure to the big busts of Bear Sterns, Lehman
Brothers, Lloyd’s and Royal Bank of Scotland are at a minimal. They created a mechanism to shift away from having their money tied to the
“credit bomb” just before the walls came tumbling early this year. This indicates the foresight and excellent banking practices of the
Canadians.
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