Canadian banks : the next domino to fall

Think that Canada is safe from the worldwide economic meltdown? Think again.

Is The Next Domino To Fall.... Canada?

Yet there is one place where that has not happened so far; there is one place that has been very much insulated from the whipping of the market, and one place where banks are potentially in just as bad a shape as anywhere else in Europe. That place is.... Canada.

As the chart below shows, which is a ranking of global banks by tangible common equity, lowest first, of the banks with a TCE ratio of under ~4% a whopping 30% are those situated in Canada, the same place where nobody thinks anything can go wrong, and which has been completely spared from the retribution of the bond vigilantes. Something tells us Canadian sovereign CDS, not to mention Canadian bank CDS, are both about to go quite a bit wider...

Canadian Imperial Bank Of Canada (CIBC) 5th worst cash reserves ratio in the world is worth 384 billion.
National Bank Of Canada (NBC) 11th worst cash reserves ratio in the world is worth 155 billion.
Bank of Nova Scotia (Scotia) 13th worst cash reserves ratio in the world is worth 571 billion.
Royal Bank of Scotia (RBC) 14th worst cash reserves ratio in the world is worth 729 billion.
Toronto Dominion Bank (TD) 15th worst cash reserves ratio in the world is worth 630 billion.
Bank Of Montreal (BOM) 21th worst cash reserves ratio in the world is worth 413 billion.

Total ``worth`` of these insolvent banks : 2.88 trillion.
Canada's GDP? 1.1 trillion.

We are the new Iceland.

Once something set it off... like a bank collapse in the US/Europe... or the house market blowing up... or consumers stop spending or a black swan event happens...or the bond vigilantes set their sights on Canada... then the whole Canadian economy goes up in smoke real fast.

Now just imagine what that will do to :

- The federal budget and the welfare state
- The Canadian credit rating
- The interest rates on everything
- Credit default swaps of Canada and the banks
- Jobs lost
- Pension funds lost
- Canadian dollar value
- The ``health care system``

And you can't really bail them out... they are worth way too much...

I suggest you prepare for the inevitable... the collapse of (basically) all the banks in Canada... and the result that will ensue with the end of the welfare state (total chaos). Hell I live in a city where about 60%+ of people work/worked for the government... and there's a million + people around here... What ya think will happen once they realize they will lose their job/not get their pensions? They gonna go feral is what they gonna do.

You gonna say that we got lots of natural resources, and you would be right... but guess what, natural resources doesn't make up for banks going supernovae.

I've never considered Canada safe from economic collapse rather slow to respond to the market downturn. The bigger picture is a world wide economic collapse and no need to really go on about it as many here are well aware that it's all part of "globalization". I do not doubt a greater depression is close at hand. Less doubtful that many of us can cope with it when it comes, even if prepared.

if money becomes worthless, and property tax is based on value of house, say it sky rockets will the government have the right to take everyone in if they dont pay?

Originally posted by thegoods724
if money becomes worthless, and property tax is based on value of house, say it sky rockets will the government have the right to take everyone in if they dont pay?

If money becomes worthless, it won't matter. Paying property taxes will probably the last thing you will worry about... and probably nobody will pay it...

I'm not sure how vulnerable Canadian banks are. My dad is a high level exec at Royal Bank and I ask him once in a while, and he constantly says we have the strongest banking system in the world. With very little high risk investment.

I looked into your claim and it still looks like we are one of the strongest banking systems in the world. I will do more research, but at least at this point, it's my opinion that this article is sensational.

Originally posted by donkeystyle
I'm not sure how vulnerable Canadian banks are. My dad is a high level exec at Royal Bank and I ask him once in a while, and he constantly says we have the strongest banking system in the world. With very little high risk investment.

It is true.

With the recent stock market plunges and all those people pulling their money out, Canada is going to experience an influx of capital as Americans seek a safe-haven in which to invest. Many of them won't go overseas, they'll go Canadian.

Entrepreneurs in Canada are going to have easier access to capital in the next year or two.

The analysis is completely out to lunch ... which ZH does do occasionally.

There's no doubt that Canada is going to have problems ... but watch for a lot of foreign money to come a courting as things get worse elswhere. It's resource rich and a financial safe haven.

There are not that many big banks in Canada. The ones that are here have been here a long time, and if Britain's banks haven't failed, more importantly 'The Corporation of the City of London' banks have not failed, so be sure that it's vast golden goose will not collapse.

Canada will be kept in tact, it will be bumpy, but in the end we really do not need anybody. we have more food, water and available land than we know what to do with. More people keep coming here, more business keeps popping up. the malls are still packed 11am on a Wednesday. Some markets will have to correct to global markets but we just shift around a bit and stay busy. Once people get sick of trying to find employment in their dying industry they will find a place somewhere else.

Call me an optimist, but unless banks raise rates to 18% again (ya go ahead and try it we are not as stupid as we were in 87') there is not getting in the way of growth. We still have the green boom to hit, if we don't it will be the apocalyptic boom, and since that is not going to happen it should be getting under way in the next 5 years or so.

reply to post by Vitchilo


I think the West has become less reliable, more and more nations are recognizing the West as thieves and find it a bad idea to firstly invest, and secondly store their wealth in Western banks. Venezuela recently took out billions of dollars worth of Gold and bonds from British and other European banks, mainly due to the plunder of Libyan wealth.

This will speed the economic decline of the Western alliance, China is finding it harder and harder to invest in US, considering the ridiculous ponzy schemes being played out in that country and the huge corruption, which is deemed to send the country's economy in a down ward trend, making Chinese investment a waste.

For example the Government giving money to the banks interest free, then the Government has to borrow money to continue public services therefore borrowing money from the banks (which the banks borrowed at interest free from the government), in this case, the banks loan money to the government with high interest rates.

Originally posted by Exuberant1
With the recent stock market plunges and all those people pulling their money out, Canada is going to experience an influx of capital as Americans seek a safe-haven in which to invest.

That's what the yen and gold for.

reply to post by tom goose


You are an export-oriented socialist nation. Similar to Japan. And highly dependent on the US.

Originally posted by eldard

Originally posted by Exuberant1
With the recent stock market plunges and all those people pulling their money out, Canada is going to experience an influx of capital as Americans seek a safe-haven in which to invest.

That's what the yen and gold for.

You are oversimplifying things.

It is important to diversify one's assets. It isn't enough just to hold gold and yen.

Originally posted by eldard

Originally posted by Exuberant1
With the recent stock market plunges and all those people pulling their money out, Canada is going to experience an influx of capital as Americans seek a safe-haven in which to invest.

That's what the yen and gold for.

Canada is a safe haven for mining companies. You will notice the Canadian exchange have a high number of mining companies, including gold. When gold went up, so to did the value of the companies that headquarter themselves in Canada.

Also, there are a large number of Chinese companies that trade on the Canadian markets as well. Canada has been very corporate friendly to a lot of different nations. Bringing in Capital investments from all over the world.

reply to post by Vitchilo


One will get a better grasp of the article if one just reads through the 'comments' by the readers:

an example of the 30 or so comments is as follows:

Fri, 08/19/2011 - 02:01 | He_Who Carried ...

No, Mr Durden, this time you got it wrong and your data is too narrow and biased.

It may well be that Canadian banks will be drawn down by the general global problems

but not on their own like SocGen or its Italian, Irish, Greek counterparts.

Stop fearmongering, it easily becomes immoral when overplayed.

Originally posted by Exuberant1
It is important to diversify one's assets. It isn't enough just to hold gold and yen.

And there are countries far more attractive than Canada.

reply to post by boncho


Investors most likely would invest in those mining companies, not Canada per se.

Originally posted by eldard

Originally posted by Exuberant1
It is important to diversify one's assets. It isn't enough just to hold gold and yen.

And there are countries far more attractive than Canada.

also in Canada, the provincial governments have sky high debts.

i remember listening in the news to Quebec borrowing money to pay the interest on what they owe.

and the banks would carry this as safe loans.

also Canada has thousands of communities that are totally dependant on government programs for their survival.

decades of politicians buying their votes, these communities are literally a powder keg, so it's impossible to cut spending.

an economic downturn would be very dificult to deal with without social unrest.
and much worst than the UK, in Canada the bums have guns.

You know what the funny thing is that no one seems to remember about the 2008 bailouts? Canadian banks were bailed out to the tune of $70 Billion even though the canadian government said our banks were fine and didn't need a bailout. It stands to reason when the next crunch comes, the @sshats will bail out the canadian banks again, that the government will tell us don't need any help. The problem all comes down to the central banks and the BIS. If we didn't have to pay interest for nothing (fiat currency created out of debt via imaginary "value") no country would be likely to have these kinds of problems. It's a ponzi scheme. Just look at the board of governors of the BOC, who did they work for before and who do they owe, not the government or canadian people. They owe the IMF through goldman sachs' and the jp morgans.

Cheers - Dave

I saw an article on Huffpost Canada regarding this blog post. At first I was alarmed until I started to read the end of the huffpost article which basically points out that Durden (from the blog) is fear mongering and doesn't have all the facts straight.

Campbell Harvey, a professor of international business at Duke University, disagrees with Boyd's assessment. "You have to look at the quality of assets," he told BNN Friday afternoon. Canadian banks' assets include large holdings of AAA-rated Canadian sovereign debt and other high-quality assets, and "that's a lot different" from European banks that hold troubled Greek debt, for example, Harvey argued. When you look at the quality of assets, "Canadian banks are amongst the most conservative in the world," Harvey said.

And here's the link to the article.

Another snippet from the article...

On Thursday, Global Finance magazine released its 2011 list of the world's 50 safest banks, and six Canadian financial institutions found themselves on it. RBC led the Canadian pack, ranking 11th in the world, with TD Bank (13th), Scotiabank (18th), Caisse central Desjardins (20th), BMO (30th) and CIBC (31st) rounding off the list.

Its hard to say really. Maybe. The difference is our banks make it very hard to borrow money....I believe thats why we weren't hit so hard. While yes, the USA is Canada's largest trading partner....the declining value of the US dollar makes it more undesirable. We still have China and England and other countries as well as more joining.

While I do think that we will endure some hard times coming up, I think we will weather the storm a little better than others. Canada isn't totally dependent on the US. IMO I think it was the US banks that were handing out loans left right and center to people that they knew would default and never be able to pay back which was a BIG part of the problem in the first place. On a global standpoint, the world was linked too heavily on the US dollar in the first place.

I remember hearing some politician from the States that suggested just printing more money to handle the crisis.....but wouldn't that just make the US dollar decline in value even more?

Lets get to the brass taxes.......no matter where you live its the world banks that started all this mess....probably intentionally. Banks...as much as we need them are bad news. Its all about $$ and how they can make more of the average joe.