RE: Canadian Banking Ranking

This has been quite the topic of conversation as of late, and quite frankly I would have to agree with Reuven Brenner “If you look at…all these rankings, they’re meaningless,” So what if our banking system is at the top of glossy chart that is a product of the Geneva-based World Economic Forum, how does that help the everyday Canadian who earn a decent wage and pay their bills on time, but is struggle ling to secure that loan to keep there small business afloat?
It’s interesting to note that if JD Power slaps a ‘highest ranking in initial quality’ on a ‘B’ vehicle brand, its not going to sway the masses that have their eyes set on Canada’s top selling vehicle the Honda Civic.

Many of us are huge fans of Consumer Reports, what a great way to make sure that you are buying the best product for your money, I love reading the reviews and looking at the nifty little red and black circles that put the elusive stamp on our consumer goods. But Consumer Reports shares the same problem with the Geneva Economic article- Macro Focus-
In the US and Canada there are well over 100 automobile magazine publications that test, review and employ experts in the industry to grade automobiles and only automobiles. I am simply floored when a friend tells me that they are considering purchasing a new fancy Lexus but are concerned that the consumer reports said it has poor visibility…..People are you really going to make a $80,000 purchase on the results of a magazine that compares rakes, hoses and toaster’s??

Due to the economic fundamentals of our global economy (gosh that sounds McCain like) banks lend over border lines just as easily as streets, and the global pipeline has been shut – to even the ‘top rated’ Canadian banks. While we are all enamored at the usefulness of a financial institutions home page and color schemes, we should really be caring about is access to the funds that are being choked out of the system. After all what good is first place if it gets you nothing!

Here are the “Top Rated Banks”

Great article by Kelly McParland posted today in the National Post

David Akin: Are Canada’s banks really world’s safest?
Posted: November 13, 2008, 4:15 PM by Kelly McParland
Full Comment, david akin, Canadian politics

Just about any time these days that Finance Minister Jim Flaherty or Prime Minister Stephen Harper talk about the global fiscal and economic crisis, you will almost certainly hear them assert that Canada’s banks are “the soundest in the world.” Indeed, that was the first thing Flaherty said Wednesday morning just as he was announcing a suite of measures to help the banks do their job better.
It’s a claim Canada’s politicians have been making ever since the Geneva-based World Economic Forum published a report Oct. 8 that ranked Canada’s banking system the “soundest” among 134 countries surveyed.
But is Canada’s banking system really that sound? Should Canadians and politicians be putting much stock in the World Economic Forum’s report?
“If you look at . . . all these rankings, they’re meaningless,” said Reuven Brenner, a professor in the Desautels faculty of management at McGill University.
Banking policy experts worry such a ranking may lull Canadians and politicians into a false sense of security or reduce the impetus to make changes and regulatory reforms they say are needed to make our financial services sector stronger.
“Our banks aren’t perfect,” said Louis Gagnon, an associate professor at Queen’s University business school.
“They do venture sometimes, at a cost, into markets where they don’t belong. There’s no question that a review in processes would be useful. There’s a measure of transparency that hasn’t existed. We’d like to know more about our banks.”
Officials, on orders from Prime Minister Stephen Har-per, are reviewing the regulatory system, although Ottawa has not provided details about the scope or purpose of the review.
The WEF report contained a ranking of 134 countries on a broad array of issues that affect a country’s ability to attract and retain new business investment.
So, for example, Canada ranked 19th in the world on intellectual property protection, 34th when it comes to co-operation in labour-employer relations, and 10th on the quality of overall infrastructure. Canada ranked first on “soundness of banks.”
But no one from the World Economic Forum objectively researched all these variables. All the WEF did was to circulate surveys to small groups of business executives in each country.
In Canada, just 75 business executives were asked their opinion about each of these factors.
As it turns out, those 75 Canadians essentially thought Canada’s banks were more sound than any group of another country’s executives thought about their country’s banking system.
“It’s important that people who are using these statistics recognize that one question by itself doesn’t give you the full answer,” said James Milway, executive director of the Institute for Competitiveness and Prosperity at the University of Toronto.
Milway’s institute was the World Economic Forum’s Canadian partner. It found the Canadian executives and administered the survey.
The survey “is really speaking to the perceptions of business executives in Canada to similar business executives around the world talking about their own country. The ranking is not the result of a thorough and deep analysis done by analysts who are looking at various ratios and measures of banking systems,” Milway said.
National Post
Gemini Award-winning reporter David Akin is the National Affairs Correspondent for Canwest News Service and is based at the CNS Parliamentary Bureau in Ottawa, Ontario, Canada.  Read more at his blog, On the Hill
Photo: Bank of Canada Governor Mark Carney pauses during a news conference upon the release of the Monetary Policy Report in Ottawa October 23, 2008. (REUTERS/Chris Wattie)

Lynchism Gem: Ignore the headlines

Famed Money Manager Peter Lynch is perhaps best known for his timeless wisdom that you can beat the pros by focusing on stocks of companies where you either work or shop or have some other edge. But a more relevant Lynchism today is this gem: Ignore the headlines.

It’s not that easy thing to do, every water cooler and dinner table has endless chatter on recession, housing, subprime woes, the credit crunch, Overpaid CEO’s and soaring energy costs.

Makes you want to sit on your thumbs and wait it all out before making any big moves. But what exactly are you waiting for???

Rarely has there been a moment in time that you couldn’t scare yourself into doing nothing. And yet, as Lynch observed nearly 20 years ago, “in spite of all the great and minor calamities that have occurred…all the thousands of reasons that the world might be coming to and end-owning stocks has continued to be twice as rewarding as owing bonds” The top reason not to buy stocks, in Lynch’s view, is if you don’t already own a home-in which case, that should be your first investment. An owner occupied home is nearly always profitable.

Warren Buffet the Oracle of Omaha has recently been quoted to be actively perusing US Stock and companies with his personal account. “Be Fearful when others are Greedy, and be greedy when others are fearful.”

The Fundamentals of the economy especially in British Columbia are very strong. If you are needing to retire and have lived your whole like in Winnipeg and have enough to live well in BC would you not leave the winter behind, if you want to use your RRSP’s and the Canadian Medicare then your California of Canada is right here in the Lower Mainland!

 

Here is a great article in the Vancouver Sun echoing these ideals

#####

B.C. in better position than most to weather financial storm

Derrick Penner

Vancouver Sun

Monday, October 20, 2008

 

VANCOUVER — On the bright side, British Columbia is heading into a period of economic uncertainty with a provincial budget that is in good shape and an economy that is performing well, according to the  Institute of Chartered Accountants in B.C. (ICABC).

However, the B.C. economy is not doing so well when it comes to the competitiveness and productivity of its workforce, the ICABC said in its annual Check Up B.C. report, an assessment of provincial economic performance. B.C.’s labour-force productivity increased by 1.3 per cent between 2002 and 2007, the report said, which lagged the national average of 4.5 per cent.

“At this time of uncertainty, it is imperative that government continues to be conservative in their economic forecasts and considers all policy tools at its disposal to stimulate investment, boost productivity and maintain sound fiscal management,” Richard Rees, CEO of the ICABC.

Rees added that the no one knows what the impact of the current financial crisis will be, and while “many British Columbians stand to lose a great deal,” the province’s economy is “in a better position than many of our competitors to weather some of the challenges.”

The Check Up report measures factors in three general areas: quality of life, work and investment, mostly how these factors performed over 2007.

On the work side, the ICABC noted that B.C. reported a record low unemployment rate of 4.2 per cent in 2007, a year that saw 70,800 new jobs created.

However, in 2008 the job market has softened, the ICABC added, with only 500 net new jobs created in August and an unemployment rate that has risen to 4.6 per cent.

“Already many resource-dependent communities are feeling the effects of reduced consumer demand and lagging commodities markets, and our forest industry continues to stagnate,” Rees said.

“But we are fortunate in B.C. that the provincial government has done a good job creating a sound economic environment.”

© Vancouver Sun 2008

Interest Rates to Fall? Will the Bank Of Canada cut again? Will the major banks follow?

In todays Vancuover Sun Eric Beauchesne puts forth the idea that even with the plunge in energy prices and a rapidly destabilizing economy the Bank Of Canada will not wait to see the September inflation report issued by Stats Canada and cut rates a further quarter of a percent.

The outlook remains bleak for the economy, which has been hammered by the US Credit Crunch effectively cutting off Banks supply of funds. Later this week we are going to see the release of the key retail and wholesale data for the Canadian markets from August, and the effects of Auto Sales and large ticket items are going to felt.

 

It will be interesting to see if the major Canadian banks lower there key lending rates to match the pending Bank of Canada Rate change. As we saw earlier this month the banks were extremely hesitant to pass along all of the rate reduction to consumers and only did so after the Federal Government committed to purchasing 25 Billion in Mortgage related securities from CMHC and other institutions.

Here is the article from the Vancouver Sun,

                                                                 #####

 

http://www.canada.com/vancouversun/news/business/story.html?id=7d420fda-c86b-4c0a-8a84-d4bc0d4abe24 

“The bottom line? Interest rates are coming down

Inflation not expected to pose an obstacle to cuts

Eric Beauchesne

Canwest News Service

Monday, October 20, 2008

 

With the plunge in energy prices and a rapidly weakening economy, inflation shouldn’t pose any obstacle to further interest-rate cuts this coming week, and for some time to come.

But the Bank of Canada won’t even wait to see the September inflation report, being issued by Statistics Canada, before cutting interest rates further Tuesday, according to analysts who expect another cut of at least a quarter point.

Despite a surprise half-point reduction earlier this month, in coordination with reductions by central banks around the world, markets are pricing in at least another quarter-point reduction Tuesday.

“The global financial crisis has taken its toll on the Canadian economy, justifying the need for more monetary stimulus,” Scotia Capital said Friday, noting that among other things “retail sales are now barely growing.”

The Bank of Canada will issue a brief statement on Tuesday explaining its interest-rate decision, which will be followed by a more detailed explanation and update of its economic forecasts in its Monetary Policy Report on Thursday and at a news conference by bank governor Mark Carney.

“Look for the Monetary Policy to noticeably downgrade the outlook for Canadian economic growth, and clip the inflation projection,” said BMO Capital Markets economist Douglas Porter.

Support for further rate cuts will likely also come from other domestic economic reports, including August wholesale sales today, and retail sales on Wednesday, both of which are expected to have been driven down by both weaker sales, especially for autos, as well as lower energy prices.

The bottom line is interest rates are coming down.

“Inflation concerns have been trumped by the credit crisis and enhanced risks of a global recession,” said CIBC economist Kirshen Rangasamy. “Declining energy prices should keep a lid on headline inflation over the rest of the year, and give the Bank of Canada ample room to provide further stimulus if necessary.”

Don’t bank on a quick retreat in inflation, however.

CIBC projects that prices edged up last month, leaving the inflation rate at 3.4 per cent, down only a notch from 3.5 per cent in August and still well above the Bank of Canada’s two-per-cent target.

“Gasoline prices continued to trend lower in September, albeit at a slower pace,” Rangasamy said, adding that downward pressure on inflation likely came from autos as well. “Those price declines should, however, be balanced out by higher prices for education, food and imported goods.”

Despite a dearth of U.S. economic reports in the coming week, the eyes of most analysts, here and elsewhere, will still be focused on the U.S. looking, hopefully, for signs of at least some stability in volatile and deeply depressed stock markets.

The only major U.S. economic report doesn’t come out until Friday, but it may contain a glimmer of hope, and from a surprising quarter: that country’s devastated housing market, the source of the whole financial and economic mess that the world now finds itself in.

Indications are that there may have been a moderate two-per-cent upturn in sales last month, noted BMO Capital Markets economist Sal Guatieri.

“The good news is that home sales appear to have stabilized this year after sliding deeply the previous two,” Guatieri said.

© The Vancouver Sun 2008

Canadian banks ranked soundest in the world

Canada has the world’s soundest banking system, closely followed by Sweden, Luxembourg and Australia, a survey by the World Economic Forum has found as a financial crisis and bank failures shake world markets.

Britain, which once ranked in the top five, has slipped to 44th place behind El Salvador and Peru, after its government pledged the equivalent of $97 billion Cdn this week to bolster bank balance sheets.

The United States, where some of Wall Street’s biggest financial names have collapsed in recent weeks, rated only 40th, just behind Germany, at 39th, and smaller states such as Barbados, Estonia and even Namibia, in southern Africa.

On Thursday, the U.S. was considering buying a slice of debt-laden banks to inject trust back into lending between financial institutions now too wary of one another to lend.

The World Economic Forum’s Global Competitiveness Report based its findings on opinions of executives and assigned banks a score between 1.0 (insolvent and possibly requiring a government bailout) and 7.0 (healthy, with sound balance sheets).

Canadian banks received a score of 6.8, just ahead of Sweden (6.7), Luxembourg (6.7), Australia (6.7) and Denmark (6.7).

U.K. banks collectively scored 6.0, narrowly behind the United States, Germany and Botswana, all with 6.1. France, in 19th place, scored 6.5 for soundness while Switzerland’s banking system scored the same in 16th place, as did Singapore (13th).

The ranking index was released as central banks in Europe, the U.S., China, Canada, Sweden and Switzerland slashed interest rates in a bid to end panic selling on markets and restore trust in the shaken banking system.

It is certanly reasuring to be a proud part of a sound economic banking system. Canada’s banking system has been underrated for years, TD Canada Trust is infact the 5th largest Bank in America, yes you read that correctly in America! It has very strong US base with TD BankNorth group, and is infact the namesake of the Celtic’s home in Boston MA !!!

TDdave

Canadian Mortgage Changes

“Mortgage changes followed concerns about housing crunch in Canada

by Julian Beltrame, The Canadian Press”

“OTTAWA – Concerns that cracks were beginning to appear in the foundations of Canada’s housing market were behind the government’s surprise decision to crack down on loose mortgage conditions ushered in less than two years earlier, officials and experts say.

Starting Oct. 15, Canadians will no longer be able to purchase a home with a government-backed mortgage with a 40-year amortization and no down payment.  

Instead, mortgages will be limited to 35 years and the government will only insure 95 per cent of the value of the home, meaning buyers will need to come up with at least a five per cent down payment. As well, borrowers must demonstrate that debt servicing costs are no more than 45 per cent of gross income and have a good credit rating.

But while most in the housing sector welcomed the announcement, they also questioned the timing. The Canadian housing sector is cooling after six torrid years of growth.

Bank of Montreal deputy chief economist Douglas Porter said the decision should have been made a year ago, when Canada’s housing market was likely exhibiting signs of a bubble as both prices and starts increased by double-digits over the previous year.

“It’s better a little late than never and better than ridiculously late,” Porter said.

“I think in hindsight, we can attributed a lot of the very strong conditions we saw right across the country in 2007 to the loosening up of rules in the prior year,” he explained. “At the time, I was a little concerned that the Canadian housing market just continued to thunder along last year when the fundamentals were starting to move against it.”

Liberal MP Garth Turner, who recently authored a book warning about a Canadian housing bust, suggested Canadians could expect to see the value of their homes fall about 15 per cent nationally, and 30 per cent in some hot markets such as Vancouver.

While praising Finance Minister Jim Flaherty for acting, Turner said the minister has also set up the conditions under which some Canadians will try to beat the Oct. 15 deadline.

“This pulls the plug right out of the bubble, but it does it in a way that inflates the bubble another few months,” he said.

“If you’ve been shopping around for a home and you don’t have any money for a down payment, you will want to buy now with zero down and a 40-year mortgage. If you’re a lender, you’ve got three months to load up people with debt regardless of what the debt-service ratio is.”

Ottawa said the changes were a precautionary measure designed to head off a U.S.-style subprime mortgage crisis, not an indication of underlying problems in the Canadian system.

But officials said concerns had been mounting for months as the government tracked the explosion in the issuing of mortgages longer than 25 years, for years the standard in Canada.

The government had been consulting with lenders, insurers and brokers for the past few months over generous mortgage products, said Jim Murphy, president of the Canadian Association of Accredited Mortgage Professionals (CAAMP).

“I think they were worried about what was coming out of the U.S. in increases in defaults and foreclosures, and I think they were concerned over their 100 per cent guarantee, wondering, ‘What is our risk here in a calamity?’ ” Murphy said.”

Julian Beltrame, The Canadian Press

http://www.canadianbusiness.com/markets/headline_news/article.jsp?content=b0710133A&page=2

I think that many folk’s are reading the headlines and forgetting to do a little more research, one of the biggest differences that can be plainly seen from the American counterparts is that the US was using 100 year Amortizations, yes you read that correctly 100 years. In the Vancouver market it is almost impossible for anyone to break into unless they have a substantial source of income, I don’t know of that many young people who have the kind of income to even consider home ownership in the Greater Vancouver Area.

I don’t foresee many being able to buy out there baby boomer parents either, and the parents need to pull the equity out of there homes in order to retire. “Nearly 3 out of 5 middle-class retirees will probably run out of money if they maintain their pre-retirement lifestyles, a new study from Ernst & Young www.ey.com has concluded.

The study, set to be released Monday, finds that Americans will have to drastically reduce their standard of living before retirement to live comfortably, or even avoid destitution, later in life. Middle-income Americans entering retirement now will have to reduce their standard of living by an average of 24 percent to minimize their chances of outliving their financial assets, the study found. Workers seven years from retirement will have to cut their spending by even more – 37 percent.” http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/07/13/MN9511OD8S.DTL

More Canadians will continue to be increasingly dependent upon their nest egg that has been built by the equity of homeownership, how will the new generation afford to take over the burden of what have become million dollar mortgages?

Just as an example the amount of income required for a 850,000 home with 5% down over a 35 year term would be 185,535 per year, I don’t know of many people under 40 that are legitimately earning that kind of income—even combined income—a great deal of the Vancouver bubble has been created from offshore money and as of right now the amount of offshore influx is still over 50k people from oversees moving here every year!

What do you think, is the younger generation going to be able to sustain these prices??