That’s it: Banks have been sent to the time-out corner. And now, Canada’s top banking regulator wants to be kept in the loop as another crisis hits the US banking system.
Driving the news: The Office of the Superintendent of Financial Institutions (OSFI) has asked for daily updates from Canada’s banks on key financial measures to ensure the country’s financial system stays stable in the wake of Silicon Valley Bank’s (SVB) collapse.
- The OSFI is mainly concerned about liquidity, in other words, whether banks hold enough assets that can be converted into cash—at lightning speed—for withdrawals.
Why it matters: The last time the OSFI used this regulatory tool was in the early months of the pandemic, which of course ended up representing a serious financial crisis. Putting the tool back into play signals the regulator isn’t messing around as it monitors the situation.
Yes, but: There are a few reassuring differences between the Canadian and US banking systems. Whereas most regional banks in the US have 50-70% of deposits uninsured (89% in SVB’s case) all deposits in Canada’s banks are covered up to a $100,000 ceiling.
- Over the 55 years of its existence, “no one has ever lost a dollar protected by the Canada Deposit Insurance Corporation” a spokesperson said.
- A Scotiabank analyst also told clients that the SVB crisis is actually a “vindication of the Canadian banking model” and its “large and diversified players.”
Zoom out: The imprudent management of lightly regulated banks is not a new thing. In fact, it was the failure of a few Canadian banks in the ‘60s that led to the creation of the CDIC.