I'd bet Canada's not the first country that comes to mind when you think of the words "financial crisis."
Indeed, normally, the United States' northern neighbor is a bastion of fiscal and economic sobriety, especially when compared to other big, developed economies like China, the United States, and the European Union.
Take the global "Great Recession" for instance: It did impact Canada, but not until global oil and resource prices began to tank. That brutal downturn was an altogether shorter and shallower affair in Canada. The Bank of Canada (begrudgingly) slashed interest rates to the bone, but it never went on the freewheeling bond-buying binge of quantitative easing as central bankers did in the United States, Europe, and Japan.
Canada's "Big Six" banks – the National Bank of Canada, the Royal Bank of Canada, the Bank of Montreal, the Canadian Imperial Bank of Commerce, the Bank of Nova Scotia, and Toronto-Dominion Bank – were prohibited by the country's regulators from indulging in the reckless casino banking that merrily went on, unimpeded by common sense, south of the border.
Their big banks, while every bit as "systemically important" and "too big to fail" as their American counterparts, were never in any danger of insolvency. Contrast that with Lehman Brothers (or Deutsche Bank, which is still – dollar for illusory, notional dollar – the most dangerously leveraged bank on the face of the Earth).
But whether they're in Manhattan, Frankfurt, Ulaanbaatar, the Sea of Tranquility, or even Toronto… bankers will be bankers. Whenever there's a buck, shekel, ruble, peso, or rupee to be had, you can bet someone will make a risky, stupid play for it.
There's no rainy day they won't totally ignore until it's too late.
And that's what's happening at some Canadian banks right now.
About the Author
25-year run as a hedge fund portfolio manager, family office chief investment officer, managing director and general counsel. Internationally recognized expert in credit and equity markets as well as macro risk management.