Good morning! There’s only one story in the financial world this week, and that’s the collapse of Silicon Valley Bank and the efforts by regulators around the world to keep the damage from spreading. It’s all SVB, all the time in today’s newsletter. Hope you enjoy.
— Joe Hood, Managing Editor, Financial Post
Note to readers: FP Finance will be going on hiatus after this edition. Thanks for reading and for your feedback.
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Canada learned the hard way that bank failures aren’t worth it
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Canada’s banking system is dominated by a few big players, something that has insulated us from the plague of bank failures that afflicts our southern neighbour. But it wasn’t always that way. As John Turley-Ewart wrote in assessing the SVB fallout this week, post-Confederation Canada had its own financial Wild West period, with untold numbers of bank failures. But while the U.S. embraced regional banks and their ability to stimulate growth at a local level, we came to a different conclusion, consolidating the sector in favour of a few big — ultimately national — banks. It’s a choice that has served Canadians well, especially in times of crisis.
LEARNING FROM EXPERIENCE
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If a Canadian bank fails, how much do you get back?
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Deposit insurance is one of the technicalities of the banking system that most are generally aware of, but prefer to ignore. That is, until there’s a run on the bank. Naimul Karim explored the question of what would happen if a Canadian bank failed with the SVB collapse in mind. As it turns out, the Canadian system is complex, providing up to $100,000 in insurance per account category, per financial institution. For a retiree with $1 million in their RRIF account, finding out only one tenth is insured may not be very reassuring. But that leaves out one important safeguard — the government. Most observers believe that, as U.S. authorities did this week with SVB, Ottawa would find a way to ensure the damage to individual depositors is minimal.
MONEY IN THE BANK?
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‘We’ll do whatever is needed’
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At first the failure of Silicon Valley Bank appeared to be an isolated incident involving a niche player in the financial system that had a highly concentrated deposit base serving the technology sector. But over the past weekend, U.S. authorities quickly began to realize that the risk of contagion was real, and began to implement the kind of emergency measures last seen during the Financial Crisis, albeit on a lesser scale. As the Financial Times reported, those first few hours showed just how serious the threat was — and why authorities took no chances in attempting to minimize the damage.
ANATOMY OF A CRISIS
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The Silicon Valley Bank collapse that shook the world: FP Explains
How fallout from the SVB collapse could complicate life for some of Canada’s big banks
OSFI takes permanent control of Silicon Valley Bank’s Canadian assets
BlackRock’s Larry Fink warns ‘more seizures and shutdowns coming’ in wake of SVB failure
Toronto stocks join global selloff as Credit Suisse sparks concerns
‘Markets are wild’: Credit Suisse leads Europe bank rout in fallout from SVB collapse
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