• 4 days How To Invest In The Cybersecurity Boom
  • 6 days Investors Are Patient With Unprofitable Giants
  • 8 days Wells Fargo Back In The Scandal Spotlight Once Again
  • 10 days 5 Stocks To Keep A Close Eye On This Year
  • 11 days As Auto Giants Flail, Look To Chip Stocks For Gains
  • 12 days Central America Is Ready For The Bitcoin Hustle
  • 13 days China’s Video Game Restrictions Unlikely To Slow Down Booming Industry
  • 15 days Top Performing Stocks As Inflation Fears Grow
  • 16 days US Airline Stocks Take A Beating On New EU Restrictions
  • 17 days This IPO Could Open Sustainable Fashion Floodgates
  • 18 days Crypto Crime Nets Another $2B Fraudster
  • 19 days This Week’s Hottest Meme Stocks
  • 21 days Why World Markets Should Be Watching Germany Closely
  • 23 days Could ‘Cultured’ Meat Rival The Plant-Based Megatrend?
  • 25 days ‘Easy Money’: Crypto Is Still Attracting Newbie Investors
  • 27 days Foreign Syndicates May Have Stolen Up To $400B In COVID Benefits
  • 28 days Gold Jumps Above $1800 Ahead Of Jackson Hole Summit
  • 28 days International Banks Blacklist Afghanistan Following Taliban Takeover
  • 30 days China’s Tycoons Are Getting A Serious Reality Check
  • 31 days U.S. Cannabis Space Heats Up With Telling Tilray Acquisition
Nathan McDonald

Nathan McDonald

Nathan McDonald is a libertarian, entrepreneur and precious metals enthusiast. He has always taken a keen interest in free markets and economics since an early…

Contact Author

  1. Home
  2. Markets
  3. Other

Canadian Banking Regulators Sound the Alarm

Alert

Originally posted at Sprott Money March 23, 2016

The shouts of warning are finally starting to come out from official bodies. Since the collapse of the oil and gas market, we have been writing about the fact that we haven't seen the worst yet.

As I have previously written, Canada and Russia are two countries that have been absolutely devastated by the crashing oil markets. The oil and gas crash has racked the Canadian economy and resulted in massive layoffs in the industry and those that support it. Yet the ripple effect has yet to take full effect and the corresponding regulatory bodies are just starting to take notice.

The Canadian banking sector, along with the Commodities sector, constitutes a massive part of the Canadian economy. Therefore, it is not surprising to learn that the former is now controlled by the latter and in a major way.

Alarm bells are ringing as growing unease settles across the Canadian banking sector. They know that defaults are coming in a massive way. Most people employed in the commodities sector enjoyed large incomes and therefore they splurged on large and expensive toys to go along with their income, as many people do. Unfortunately, this means another thing - large loans, which are becoming more and more unlikely to be repaid.

The Wall Street Journal is now catching up with this reality as well. In a recent article they highlighted that the Canadian banking sector is horribly under-funded in the face of this growing crisis and points out that Canada's banking regulators are even taking notice.

"Canada's banking regulator is urging the country's major banks to review their accounting practices to ensure they have sufficient reserves as the commodity-price collapse takes a toll on the economy."

"We want them to take a good look at their accounting practices," said Superintendent of Financial Institutions Jeremy Rudin. "They should support loss-absorbing capacity and the ability to manage through difficult times in general," he added.

Regulators are taking notice and for good reason. The amount of exposure that the Canadian banking sector has to the flailing oil and gas markets is massive, equating to roughly C$107 billion!

People should be even more startled by the fact that this industry is nowhere near starting up again, even if prices were to recover tomorrow. It would take time to rehire and restart the production that has been shut down.

This current reality means that this ticking time bomb is set to explode in the hands of the Canadian Banking sector and thus cause a ripple effect across the Canadian economy and undoubtedly across the highly intertwined Western banking structure.

Could Canadian banks be the next spark that lights the match? Will this economic situation be the catalyst that sends us plummeting into the next major financial crisis? It is incredibly possible yet unknown. Sadly, the world is facing many scenarios that could cause similar turmoil.

 


The views and opinions expressed in this material are those of the author as of the publication date, are subject to change and may not necessarily reflect the opinions of Sprott Money Ltd. Sprott Money does not guarantee the accuracy, completeness, timeliness and reliability of the information or any results from its use.

 

Back to homepage

Leave a comment

Leave a comment