posted on Mar, 26 2013 @ 10:00 AM
Source: The Globe and Mail
Canada’s banking regulator has singled out the country’s six largest banks as being so vital to the nation’s economy that they will have to
carry higher capital levels than their peers.
I have mixed feelings about this issue. I will say that it is nice to know that Canada's banking sector has enough forethought to put these rules in
place before any major financial crisis (in Canada) takes place. The new rules state that the 6 major banks in Canada will have to retain an extra 1%
surcharge to any 'risk-weighted capital' in their portfolio. 1% may not seem like much but we are talking about massive sums of money. The banks
won't be too pleased since they would rather take that 1% and invest it instead of having to sit on it.
The other side of me reads the article more like this: 'Canadian taxpayers WILL bail out these banks WHEN they fail
'. I'm not happy to know
that us taxpayers will have to pay for the fat banker's mistakes. I feel like this is simply a preemptive warning to us Canadians to prepare for the
inevitable. By simply stating that these banks are 'too big to fail' runs the risk of these banks getting even larger because investors will think
their money is safe regardless of market conditions.
The fear had been that these banks might take more risks based on the presumption that the government would have to bail them out if they ever
found themselves on the brink. By forcing large banks to hold more capital and take other steps to plan for a potential crisis, governments are hoping
to limit the risks these institutions will take and decrease the amount that taxpayers could possibly be on the hook for.
Notice the last part of that paragraph? Seems pretty clear what will happen if any of these banks go downhill. I sure hope their plan works as well as
they hope but bankers always seem to find a way to take advantage of and capitalize on any sort of situation. I'm glad I switched out of major banks
What do you think ATS? Is this a positive step towards protecting Canada's banking sector or is this a setup to let these banks run amok without