# Bail-in Regulations for Canadian Banks



## Brainer (Oct 8, 2015)

Bloomberg article: Canada Proposes New Bail-in Regulations for Country's Banks

https://www.bloomberg.com/news/articles/2017-06-16/canada-proposes-new-bail-in-regulations-for-the-country-s-banks

Does anyone know precisely how this will work? Bondholders and who else might be caught holding the bag in a black swan event?

Didn't the federal Liberals say a while back they were scrapping this idea?


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## BoringInvestor (Sep 12, 2013)

In before the inevitable confusion re: bail-ins....

I don't recall if the Liberals said they'd scrap this, but generally the 'bail-in' Canada is proposing is different from what was seen in other countries (such as Cyprus).

Generally the difference is:
- The 'Cyprus bail-in model' - if a bank is in trouble of failing they can take money held by depositors.
- The 'Canada bail-in model' - if a bank is in trouble they can convert bonds (aka corporate debt) to equity.

If you're so interested, you can read the legislations here starting on page 129: http://www.gazette.gc.ca/rp-pr/p1/2017/2017-06-17/pdf/g1-15124.pdf, and I'll also leave this paragraph from page 138 with emphasis added:

"*The proposed scope does not capture deposits*, secured liabilities (e.g. covered bonds), eligible financial contracts (e.g. derivatives) or structured notes. As such, these instruments would not be eligible for conversion under bail-in."


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## AltaRed (Jun 8, 2009)

It does include NVCC compliant preferred shares that could get converted at 5 common equity units for every $25 pref... IOW, cost base of $5 if and when common equity prices fell to that range. The banks have been calling in fixed reset pref share issues when they can at $25 par and re-issuing NVCC compliant issues for some time, at least 3 years I believe.


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## humble_pie (Jun 7, 2009)

AltaRed said:


> It does include NVCC compliant preferred shares that could get converted at 5 common equity units for every $25 pref... IOW, cost base of $5 if and when common equity prices fell to that range.



this is not an issue that i understand very well. However, something is suggesting to me that it's not a question of converting "if and when" common equity prices would drop to a low level such as $5.

that same something - kind of a distant early warning antenna - is suggesting to me that the flow of events would be the other way around. A forced conversion would occur, flooding markets with 5 or 10 times as many common shares, whose market price would promptly swoon to the $5 level, or lower if panic set in.

in other words, all security holders would participate in a bank's restructuring. Not just the bondholders. Not just the preferred shareholders. The common shareholders would likely lose staggering value as well. 

i'd love to be wrong, but for the time being that's how i see it.


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## AltaRed (Jun 8, 2009)

True it is not as simple as I have stated, but close. It is OSFI, under certain conditions of determining non-viability of a FI, that makes the call for conversion of the prefs to common shares. The conversion price is the higher of the then trading price of the commons or $5. In reality, it is unlikely the Superintendent will call for the conversion until the common equity holders are essentially wiped out. 

Essentially, the pref holder suddenly owns 5 commons (whatever the then price of the commons). The attached link is a good summary

http://jmrdwealth.com/assets/NVCC-Preferred-Shares.pdf


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## humble_pie (Jun 7, 2009)

thankx for the link. It is a good summary.

we should all study this matter. It's a radical change, no? no longer is the bank of canada going to make everything better if a bank gets into dire straits. Instead the bank's securities holders will pay.

let us suppose just one bank. One of the chartered five. Now the common shares, having touched close to $100 in the recent glory years, are wallowing in the dust at pennies each. Can you imagine the effect. On the CPP, on pensions everywhere, on mutual funds, on XIU & other ETFs, on retail shareholders holding any canadian bank since they will all react in sympathy with the fallen angel.

brrr. I don't want to even think about it.


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## james4beach (Nov 15, 2012)

The equity of banks was never safe; this isn't new. The horror story you describe has already happened, for example with Citigroup and Bank of America, whose shares are now worth just a fraction of their 2007 value. Some European banks also issued tremendous amount of equity to recapitalize.

Common equity is the capital base... it always has been. If the bank depletes its capital, for example by gambling in financial markets at 25:1 leverage, it will be the shareholders who pay.

The only part I think is new is the conversion of some kinds of corporate bonds to equity.


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## james4beach (Nov 15, 2012)

My understanding of the bail in legislation:

Banks have balance sheets. When they experience losses on the asset side of their balance sheets, equity directly takes a hit -- that's old news. The problem is, what do you do with the bank's balance sheet once equity is wiped out? A viable bank needs capital, aka common equity. The government is defining a restructuring process that describes how the bank's balance sheet will be turned back into a viable form, so the bank can survive.

The main concept is show in the attached diagram, taken from the legislation.

View attachment 15482


Let's say you're in the middle of the diagram, a bank that has suffered losses. Equity shrinks, or is virtually wiped out, as the brave bank shareholders have incurred the big losses -- as they deserve to, the natural flip side for the enormous gains they enjoy (high risk, high reward).

At this point you have a broken bank. The CDIC takes control and restructures the balance sheet. To make the bank's balance sheet normal again, the government converts various things into equity: preferred shares and subordinated debt. The legislation points out that virtually all instruments of this kind are already eligible for bail-ins, because since 2013, any capital instruments issued by banks have been categorized as NVCC and subject to bail-in.

The legislation seems very and sensible. They spell out that deposits are NOT subject to bail-in. That means that deposits will not be lost in this balance sheet transformation. Deposits are safe.

*So who eats the losses?* Common equity holders first, of course. After them, some combination of preferred shareholders and bank bondholders. This might surprise some investors who mistakenly believe that preferreds and bonds are safe. During this kind of balance sheet transformation, equity value gets decimated. I expect that everyone in these groups would lose a lot of their investment.


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## mark0f0 (Oct 1, 2016)

Who's caught holding the bag? Adjustable rate borrowers from the banks in the short term. In the medium term, term loan borrowers. In the long term, depositors and the borrowers as the Bank of Canada will be forced to run QE/NIRP for an extended period to keep the economy liquid and out of contraction.

In the USA, when the housing market collapsed, the banks, by virtue of having written large numbers of 30-year mortgages, had a problematic mismatch between assets and liabilities. They couldn't just arbitrarily raise the rates on borrowers because most of the loans were locked in for significant terms. Hence, the US banking system ran into a systemic solvency crisis, and required bailouts.

In Canada, if our housing market collapses (for example) and the banks find it more costly to fund themselves, they will raise the rates on the adjustable rate borrowers. They can do this because 40% of the loan base of Canadian banks is adjustable based on a rate the bank itself sets ("Prime"), and the other 60% of the asset base is mostly in term obligations with an average term to maturity of around 2 years. Essentially the 'bail-out' will come from borrowers, and, over time, from depositors in the form of very low interest rates.

In the US collapse, circa 2008-2009, a big chunk of the problem was whether or not Fannie Mae/Freddie Mac would stand behind their insurance obligations of the US housing market. Fannie/Freddie's MBS not being fully guaranteed by the US Government. The US banking crisis more or less disappeared pretty much to the day that Congress passed legislation explicitly guaranteeing Fannie Mae/Freddie Mac's obligations with that of the full faith and credit of the United States Government.

In Canada, CMHC unconditionally guarantees all CMHC subprime mortgage insurance they've written. So there is no legislative hang-up and the market should have complete confidence in CMHC subprime mortgage guarantee obligations being fully fulfilled.

So bail-ins in Canada of big-5 institutions? Not a chance. Its practically mathematically impossible.

The risk to the common equity of Canadian banks is that, in response to the banks earning windfall profits during a housing crash, that the Government of Canada institutes a surtax on their profits, or some sort of retroactive deductible on CMHC subprime mortgage insurance claims. After all, I just don't think Trudeau will sit back idly and watch $100-$300B of taxpayers' money be given to the Canadian banks to pay off CMHC subprime mortgage insurance claims. He'll use some sort of excuse like, "Governments don't write cheques to wealthy banks, because its 2019", much like his famous line of "Because its 2015" with respect his gender choices around cabinet appointments. Political pushback, not balance sheet or loans, will be the proverbial _Waterloo_ that the banks face.

Another scenario that I have theorized is that many credit unions, who do not tend to use CMHC subprime insurance to the same extent as the big-5, and tend to have little to no access to the capital markets, as well as poor management controls in many instances, will run into trouble in a Canadian housing crash. As a sort of back-room quid pro quo, the government could force the Big-5 to take over such underwater institutions, and guarantee their depositors in full. It could be a hit against the big-5's earnings growth if they have to dump many billions of shareholders' equity into resolving underwater credit unions.


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## andrewf (Mar 1, 2010)

james4beach said:


> My understanding of the bail in legislation:
> 
> Banks have balance sheets. When they experience losses on the asset side of their balance sheets, equity directly takes a hit -- that's old news. The problem is, what do you do with the bank's balance sheet once equity is wiped out? A viable bank needs capital, aka common equity. The government is defining a restructuring process that describes how the bank's balance sheet will be turned back into a viable form, so the bank can survive.
> 
> ...


Your link/attachment is dead.


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## Rusty O'Toole (Feb 1, 2012)

There are certain sound banking rules worked out over hundreds of years that allow a bank to operate with minimal chance of going broke and losing everyone's money. Canada's banking system used to have a strict set of rules that led to very conservative banking practices. And, any banker who played hanky panky would certainly be disgraced and never work in finance again, and probably end up in prison.

Then certain American banks found out they could make more profits faster if they ignored the rules and pulled every skeevy trick in the books. And when they inevitably went bust, just go to the government for a bail out and pass the losses on to the taxpayer.

Now we are moving on to the next phase where the bailouts are built into the system and they don't need to bother the government.

Guess what happens when the rules are relaxed and everyone is given a safety net? You will find some bankers will take a chance and do some pretty wild deals knowing if they blow up, nothing very bad will happen - to them. These radical guys will make all the money and soon everyone will have to follow suit or be left behind. 

The short story is when you throw away the rule book and there are no consequences for risky behavior, you are going to get more risky behavior and sooner or later the whole system blows up.

So. Do you want bad banks and more financial crises? Because this is the way you get them.


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## james4beach (Nov 15, 2012)

andrewf said:


> Your link/attachment is dead.


I don't know what happened to it. Unfortunately I lost the nice cleaned up screen shot I had prepared... oh well. Eaten by the internet machine.

Overall, I like the look of this legislation. The critical part will be fully disclosing to all preferred & bond investors the nature of the risk they are taking on.


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## andrewf (Mar 1, 2010)

Do you have a link to the original chart?


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## humble_pie (Jun 7, 2009)

james4beach said:


> Overall, I like the look of this legislation. The critical part will be fully disclosing to all preferred & bond investors the nature of the risk they are taking on.



why would one imagine they will fully disclose? 

in their index & ETF fund families, are they fully disclosing the representational samples they're actually holding instead of the listed securities they claim they are holding? 

are they fully disclosing the non-listed securities they've loaned out at rates ranging from 2% to 5% in order to generate the revenues that pay for the real costs these fund products have to absorb? 

one should never underestimate the willingness of investors to happily purchase pap .each:


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## james4beach (Nov 15, 2012)

Here's the image, this was in the legislation document that BoringInvestor posted.


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## Rusty O'Toole (Feb 1, 2012)

In other news, Bremer Landesbank in Germany decided to give themselves a bail in by cancelling interest payments on certain bonds. There was a time when defaulting on interest payments would put the bank in default, and the receiver would be called in to protect the depositors, investors and customers. Now it's a slick way to save money. I don't know how they get away with it. I suppose they snuck a clause into the fine print. Or maybe Germany beat Canada to the bail in legislation. The lesson is, once this bail in business becomes law you will be a fool to trust a bank that can disappear your money anytime.

https://www.ft.com/content/17608487-5e70-341e-b8b3-a70a59792f24?mhq5j=e2


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## humble_pie (Jun 7, 2009)

it's really a shame that this thread will be archived under "Bloomberg" & will probably be impossible to find doing a search for canada's bank bail-in provisions (cmf archives don't lend themselves to searches very well)

i say a shame because this thread has got some first-rate resources & views on how (shudder) bank bail-ins would work in this country.

jas4 seems to be correct. Bank deposits would survive unscathed, at least to the extent of CDIC insured protection for each account.

i guess the drill for the terminally anxious goes like this: sell you bank stocks in the nick of time, distribute the proceeds in $95,000 CDIC insured accounts spread across the big 5 chartered banks, avoid provincial credit unions since they will be the first to collapse.

usually, articles on this theme also say to buy guns & canned groceries.

.


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## james4beach (Nov 15, 2012)

I changed the thread title


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## james4beach (Nov 15, 2012)

humble_pie said:


> are they fully disclosing the non-listed securities they've loaned out at rates ranging from 2% to 5% in order to generate the revenues that pay for the real costs these fund products have to absorb?


A bit off topic but an important correction. Some ETFs actually loan out as much as 50% of the assets of the fund. There are some major bond ETFs that routinely lend out 20% to 30% of assets to hedge funds.

Which is why I run my own "bond fund", so I know that I own the assets. Furthermore, I own them in a cash settled (not margin) account so that the broker can't lend away my valuable government bonds.


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## sags (May 15, 2010)

If there was one lesson from the US financial crash it was that........nobody knows who owes other people what.

In a crisis situation the government could do anything they wanted to do.


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## james4beach (Nov 15, 2012)

The systemically important banks (The Big Six) will not be allowed to fail. So the government is doing something better than leaving things up to seat-of-the-pants handling in an emergency: they are defining what procedure will be followed once a bank is determined to be insolvent.

So instead of handling this in an ad hoc way when it happens, they have outlined the process (converting various instruments to equity). The point of all of this is to keep the bank alive.


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## Rusty O'Toole (Feb 1, 2012)

I would prefer to see banks conservatively run, properly regulated, and if a financial institution got into default (liabilities in excess of assets) the receiver step in. Then, the institution put back on a paying basis or wound up as was appropriate, and the management arrested tried and jailed if they were guilty of fraud or crime.

That is the system that worked well for more than 100 years.

An easy come - easy go system that assumes the management will run the bank into the ground, and tries to protect them at the expense of investors, is asking for trouble.

No Canadian bank has gone bust since 1854. Why would they suddenly be worried about banks being insolvent if they were run properly?


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## andrewf (Mar 1, 2010)

Who says easy-come, easy-go? Bank regulation in Canada is not overly lax. And bank failures are rare. But if we're going to have big banks, in the unlikely event that they fail, it should be those with skin in the game that pay, and not the taxpayer. If the taxpayer is ultimately on the hook, why allow private banks to take deposits at all?


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## humble_pie (Jun 7, 2009)

Rusty O'Toole said:


> I would prefer to see banks conservatively run, properly regulated, and if a financial institution got into default (liabilities in excess of assets) the receiver step in. Then, the institution put back on a paying basis or wound up as was appropriate, and the management arrested tried and jailed if they were guilty of fraud or crime.
> 
> That is the system that worked well for more than 100 years.
> 
> ...




this change in bank regulations is huge. It profoundly alters the canadian investment landscape. I'm certainly not one who fully understands it all just yet, so i'm happy to be able to read a number of different views here in this thread.

rusty i'm interested in your views & i appreciate your taking the trouble to post here. But i would not agree that the previous long-accepted regulation of canadian banks by regulators plus dependable support from the bank of canada if necessary, ever meant that mismanaging or fraudulent executives would be automatically identified, tried, jailed or otherwise punished.

one could argue that under the new bail-in provisions, the voting common shareholders would be just as effective at holding fraudulent bank executives feet to the fire, as any lethargic gummint regulator. Perhaps more so.

one could argue, in fact, that the discovery of rot would be swifter & fiercer under the new system, than under a system that would placidly reward incompetence or fraud with gigantic donations of taxpayers' money. 

after all, the new bail-in provisions call for all the shareholders & debenture holders of an insolvent bank to first be financially ruined. One has to assume that self-interest will motivate the securities holders & they will be vigilant about getting erring feet to the flames before major harm befalls a particular bank.

.


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## Eclectic12 (Oct 20, 2010)

Rusty O'Toole said:


> I would prefer to see banks conservatively run, properly regulated, and if a financial institution got into default (liabilities in excess of assets) the receiver step in. Then, the institution put back on a paying basis or wound up as was appropriate, and the management arrested tried and jailed if they were guilty of fraud or crime.
> 
> That is the system that worked well for more than 100 years ...


If that's the system that worked so well for 100 years, why are there many references to the gov't getting other banks to provide liquidity or absorb banks in trouble?
Why did the minister of finance of the day ignore a letter outlining essentially fraud and bad audit practices that caused a bank failure?




Rusty O'Toole said:


> ... No Canadian bank has gone bust since 1854.


How soon people forget.

*Failed Canadian Banks since CDIC was created in 1967*
1991 Bank of Credit and Commerce Canada 
1986 Bank of British Columbia
1985 Northland Bank and Canadian Commercial 

There is also Home Bank that failed in 1923 where the assets were about $2.7 million and the liabilities were about $15.5 million. This created a panic so that the Ontario gov't provided Dominion bank with $1.5 million to stop a bank run.

The Feds didn't cover all the losses but did pay $5.45 million to depositors.


If everything has run so smoothly since 1854 and was so much better - why was there a bailout *ninety-three* year ago as well as liquidity measures?


Cheers


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## kcowan (Jul 1, 2010)

Eclectic12 said:


> How soon people forget.
> 
> *Failed Canadian Banks since CDIC was created in 1967*
> 1991 Bank of Credit and Commerce Canada
> ...


Not to mention all the trust companies whose names have disappeared!


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## Eclectic12 (Oct 20, 2010)

True ... if one includes other financial institutions that took deposits but had a different name (ex. Bank of BC Mortgage Corp or Crown Trust) - then the 1967 to present failures jumps from three to forty three. 

CDIC's web page lists them all as "bank failures" but as a lot of the names did not include "bank", I stuck to the ones that did.


It seems clear that the neat, stable "good old days" are far more complicated than people would like to think.


Cheers


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## new dog (Jun 21, 2016)

Those were good points electric12.


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## Rusty O'Toole (Feb 1, 2012)

I am talking about a change in mind set from where banks were held responsible for their actions to the new system where it is assumed they will default and the main thing is to protect them from their mistakes at the expense of their investors.

Yes we used to have a small trust company or bank fail every few years NEVER a major chartered bank and ALWAYS contained. After a few days life went on as normal.

Too big to fail, or too big to jail was NOT part of our financial system.


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## andrewf (Mar 1, 2010)

^ So, break up the big 5?


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## james4beach (Nov 15, 2012)

I just think the Big Six banks require more regulation and should be treated more like government entities. Since the government back stops them, and since the banks are worthless without government support, then perhaps the employees should be paid like government employees too. Put a cap on salaries, get rid of the multi million $ pay for CEOs.

People will say 'then you can't retain the best and brightest talent'. Fine, let them go and create their own, new, non-government-backed bank.

It's unfair that a bank CEO gets paid millions $ while he runs a bank into the ground, incurring millions or billions in cost for hard working tax payers. Perhaps another approach is to pay bank employees purely with restricted equity (restricted stock units) that takes time to be unlocked.

Pay the TD CEO a salary of $400,000 a year, with the rest of the compensation in restricted common shares that can't be sold for 5 years. I bet you he will suddenly become more cautious and the bank will become less prone to implosion.


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## mark0f0 (Oct 1, 2016)

james4beach said:


> Pay the TD CEO a salary of $400,000 a year, with the rest of the compensation in restricted common shares that can't be sold for 5 years. I bet you he will suddenly become more cautious and the bank will become less prone to implosion.


I'd have to argue against that. If you put in a CEO with token pay, they're probably not going to take any risks, and probably won't run the outfit efficiently. The result is that you will end up with an even more comatose economy than you already have today.

I personally believe that minority shareholders should gain a slightly stronger _oppression remedy_, pension funds, mutual funds, and ETFs should be required to give their beneficiaries access to the proxy voting process for the underlying shares. But restricting salaries doesn't make much sense, as compensation is solely the prerogative of shareholders.


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## james4beach (Nov 15, 2012)

But you wouldn't be reducing salary, you'd just be shifting it to equity. The problem with high cash-based compensation is that the CEO gets paid immediately, whether or not he destroys the bank -- it encourages short term risk taking. You can provide the same total compensation, but when it's equity-heavy the CEO will work harder to not destroy the bank.


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## birdman (Feb 12, 2013)

james4beach said:


> But you wouldn't be reducing salary, you'd just be shifting it to equity. The problem with high cash-based compensation is that the CEO gets paid immediately, whether or not he destroys the bank -- it encourages short term risk taking. You can provide the same total compensation, but when it's equity-heavy the CEO will work harder to not destroy the bank.


James, I think that a good portion of Bank CEO's compensation is deferred, based on results, and stock heavy. Stgock options are falling out of favour. Check this out: http://business.financialpost.com/n...port/wcm/1a67fc29-b268-4130-89d3-78540ad39067


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## james4beach (Nov 15, 2012)

frase said:


> James, I think that a good portion of Bank CEO's compensation is deferred, based on results, and stock heavy. Stgock options are falling out of favour. Check this out: http://business.financialpost.com/n...port/wcm/1a67fc29-b268-4130-89d3-78540ad39067


The tables in that article shows that the big bank CEOs are still paid millions before equity compensation. Disgustingly high salaries for a government-backed enterprise.


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## Eclectic12 (Oct 20, 2010)

Rusty O'Toole said:


> ... Yes we used to have a small trust company or bank fail every few years NEVER a major chartered bank and ALWAYS contained. After a few days life went on as normal ...


Odd that it would be "every few years" when CDIC lists seven in 1983 and seven in 1985. Using consecutive year, there are seven years in a row of one through seven deposit taking institutions failing.




Rusty O'Toole said:


> ... Too big to fail, or too big to jail was NOT part of our financial system.


History doesn't seem to support this so much. I'll have to find the review of Canadian banking paper that documented a long list of banks that merged - the notes said these mergers were to avoid a bankruptcy. One of the complaints with the Home Bank failure was that timely action would have meant a merger that avoided the depositors losing money.

Like it or not - there is a long history of the gov't or it's surrogates intervening in the Canadian banking system.


There don't seem to be a lot of examples of Canadian bank executives being held to account. 

The ten Home Bank officials charged were sentenced to one year, where nine of the convictions were overturned. The last conviction might also have been overturned but the lack of funds meant no appeal was made.


Cheers


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## doctrine (Sep 30, 2011)

I am okay with bank CEOs being well paid. They aren't flipping burgers, they're managing tens of thousands of employees and hundreds of billions of dollars in capital, each. They are the all-stars of the Canadian business world and keys to our economic well being. Their strategic decisions can create or destroy billions of wealth in moments. And many of them are paid less than most high profile entertainers and sports figures. Sports figures are hailed as heros and role models for playing a game, and large cap CEOs are hailed as villians and crooks for keeping tens of thousands of people employed, and in most cases are making far less than the stars of the sports world. Everything is relative, and relatively speaking, I would vote FOR the salary of the bank CEOs in which I have shares, at least at this time.


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## humble_pie (Jun 7, 2009)

the trouble with this thread is that everyone has such convincing arguments, so well set forth

Edit: i'm being serious, it's nice to see folks calmly discussing what is a huge issue for canadians with so many diverse points of view


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## OnlyMyOpinion (Sep 1, 2013)

doctrine said:


> I am okay with bank CEOs being well paid. They aren't flipping burgers, they're managing tens of thousands of employees and hundreds of billions of dollars in capital, each. They are the all-stars of the Canadian business world and keys to our economic well being. Their strategic decisions can create or destroy billions of wealth in moments. And many of them are paid less than most high profile entertainers and sports figures. Sports figures are hailed as heros and role models for playing a game, and large cap CEOs are hailed as villians and crooks for keeping tens of thousands of people employed, and in most cases are making far less than the stars of the sports world. Everything is relative, and relatively speaking, I would vote FOR the salary of the bank CEOs in which I have shares, at least at this time.


Well said!


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## sags (May 15, 2010)

Some of those well paid CEO's would be "flipping burgers" if the company shareholders actually had any power in decision making process.

Warren Buffet isn't that impressed with CEO's and their pay packets. 

http://www.steverrobbins.com/articles/buffettceo/


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## 5Lgreenback (Mar 21, 2015)

Admittedly being lazy here and haven't read the article. How can some folks possibly argue that taxpayers should bail out the banks over shareholders? I own bank shares so as much as I would like to argue that taxpayers should cover my choice of investment, I just can't find the logic or morality there? What am I missing?

Edit- read the article, doesn't change my question. It looks like a step in the right or at least a better direction to me.


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## m3s (Apr 3, 2010)

UK banks are changing their terms and conditions. The king is a fan of the great reset

Meanwhile people in countries like Lebanon are robbing banks for their own money and China has the military protecting banks

Time for self-sovereign money and data folks


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## MrMatt (Dec 21, 2011)

m3s said:


> UK banks are changing their terms and conditions. The king is a fan of the great reset
> 
> Meanwhile people in countries like Lebanon are robbing banks for their own money and China has the military protecting banks
> 
> Time for self-sovereign money and data folks


You know some sources for that would be nice.

For example are you talking about the Chinese military exercises, or are you talking about actual aid to civil power actions.


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## m3s (Apr 3, 2010)

MrMatt said:


> You know some sources for that would be nice.
> 
> For example are you talking about the Chinese military exercises, or are you talking about actual aid to civil power actions.


Sources for which?

China has a lock down on media so it's pretty hard to get much info

If only we had real journalism that weren't just shills making opinions of twitter posts


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## MrMatt (Dec 21, 2011)

m3s said:


> Sources for which?
> 
> China has a lock down on media so it's pretty hard to get much info
> 
> If only we had real journalism that weren't just shills making opinions of twitter posts


You made 3 claims, and didn't cite any of them.

Also banks change the T&C all the time, they send out a little pamphlet when they do. You should explain why this is newsworthy.


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## m3s (Apr 3, 2010)

MrMatt said:


> You made 3 claims, and didn't cite any of them.
> 
> Also banks change the T&C all the time, they send out a little pamphlet when they do. You should explain why this is newsworthy.


It's a subtle hint of what is coming. Banks around the world are preparing for some kind of crisis

I wouldn't want to hold bank stock right now. They are "too big to fail" yet around the world are adding T&C in case they do 😅 We can see the weakest dominos already falling. MSM talked about Chinese contagion for a bit last fall now aren't saying a thing as if it went away

US is cracking down on rules for regional banks. Here's a source for you

U.S. bank regulators consider new rules for regional banks in times of crisis


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## MrMatt (Dec 21, 2011)

m3s said:


> It's a subtle hint of what is coming. Banks around the world are preparing for some kind of crisis


Every entity around the world should be preparing for a crisis at all times.



> US is cracking down on rules for regional banks. Here's a source for you
> 
> U.S. bank regulators consider new rules for regional banks in times of crisis


Nice dodge on supporting the previous claims.

I think that it's good they're looking at this, we tend to handle crisis pretty poorly, they should try to be better.


FYI, I'm not denying there are issues, or that there is a crisis or anything like that.
I fully expect that a crisis of some sort will happen, as they happen often.

I actually have a line item in my budget called "one time expenses", and it's for those "unpredictable one time expenses" that seem to happen with surprising regularity.

The reason the Dave Ramsey plan first step is to save $1k is because you're almost guaranteed to have a minor crisis that will derail you, and making minimal preparations and $1k, even $1k US, is such a minimal preparation.


I don't know what the crisis is, but there is a crises of varying scale almost continuously, and it's ridiculous to think that another isn't right around the corner, or more likley, already in progress, we just haven't noticed.


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## m3s (Apr 3, 2010)

MrMatt said:


> The reason the Dave Ramsey plan first step is to save $1k is because you're almost guaranteed to have a minor crisis that will derail you, and making minimal preparations and $1k, even $1k US, is such a minimal preparation.
> 
> I don't know what the crisis is, but there is a crises of varying scale almost continuously, and it's ridiculous to think that another isn't right around the corner, or more likley, already in progress, we just haven't noticed.


Where do you store that $1k though? Many banks around the world are adding terms to be able to "bail-in" so $1k might be locked or gone. How long before CDIC refunds it?

I keep min balances in the bank for the free banking and available LOC room for emergencies. If you look at say Lebanon or Ukraine those LOC or $1k in the bank isn't much help


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## MrMatt (Dec 21, 2011)

m3s said:


> Where do you store that $1k though? Many banks around the world are adding terms to be able to "bail-in" so $1k might be locked or gone. How long before CDIC refunds it?
> 
> I keep min balances in the bank for the free banking and available LOC room for emergencies. If you look at say Lebanon or Ukraine those LOC or $1k in the bank isn't much help


There is virtually no chance of any regulated bank/credit union in Canada closing and losing or seizing retail deposits.

Canada isn't Lebanon or Ukraine.
Also my contingency plan for a military invasion doesn't involve having available room on my LOC.


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## Covariance (Oct 20, 2020)

m3s said:


> It's a subtle hint of what is coming. Banks around the world are preparing for some kind of crisis
> 
> I wouldn't want to hold bank stock right now. They are "too big to fail" yet around the world are adding T&C in case they do 😅 We can see the weakest dominos already falling. MSM talked about Chinese contagion for a bit last fall now aren't saying a thing as if it went away
> 
> ...


There is an ancient parable about crying wolf. It doesn't end so well.


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## m3s (Apr 3, 2010)

Covariance said:


> There is an ancient parable about crying wolf. It doesn't end so well.


My bad. The global economy seems perfectly fine

There is also something about squirrels preparing for winter. And something about sticking your head in the sand

Depends on your time horizon I guess. Mine is probably longer


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## Covariance (Oct 20, 2020)

m3s said:


> My bad. The global economy seems perfectly fine
> 
> There is also something about squirrels preparing for winter. And something about sticking your head in the sand
> 
> Depends on your time horizon I guess. Mine is probably longer


I'm not suggesting the world is fine, or there is nothing to worry about. But crying fowl on the banks' living wills is well beyond the more immediate concerns people should be focused on.


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## m3s (Apr 3, 2010)

Covariance said:


> well beyond the more immediate concerns people should be focused on.


Yes I believe most disagreements come down to having different time horizons


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## MrMatt (Dec 21, 2011)

m3s said:


> Yes I believe most disagreements come down to having different time horizons


I think it's actually different priorities/weightings and perspectives.

I fully expect lots of great reset type problems.
I don't think that means they're going to seize a few $k from my CDIC insured bank account.


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