• 269 days Could Crypto Overtake Traditional Investment?
  • 274 days Americans Still Quitting Jobs At Record Pace
  • 276 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 279 days Is The Dollar Too Strong?
  • 279 days Big Tech Disappoints Investors on Earnings Calls
  • 280 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 282 days China Is Quietly Trying To Distance Itself From Russia
  • 282 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 286 days Crypto Investors Won Big In 2021
  • 286 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 287 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 289 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 290 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 293 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 294 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 294 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 296 days Are NFTs About To Take Over Gaming?
  • 297 days Europe’s Economy Is On The Brink As Putin’s War Escalates
  • 300 days What’s Causing Inflation In The United States?
  • 301 days Intel Joins Russian Exodus as Chip Shortage Digs In
  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