Q: The SVB rescue seems to have ushered in some fundamental changes in banking in the U.S which one would assume will have ramifications here in Canada.
Now that the Fed has essentially recognized that depositors are no longer unsecured creditors and bonds are valued at par regardless of market rates, what are the implications for investors?
Equity investors will have to assess their position and risk. Certainly giving every Canadian the option of having an account at the Bank of Canada would solve the security issue for depositors, and would avoid the considerable expense of extending insurance to all deposits regardless of amount.
But are Canadian banks and their investors now significantly disadvantaged if one central bank accepts government bonds as collateral at par regardless of market value while the other doesn't? Your thoughts as always would be appreciated.
Mike
Now that the Fed has essentially recognized that depositors are no longer unsecured creditors and bonds are valued at par regardless of market rates, what are the implications for investors?
Equity investors will have to assess their position and risk. Certainly giving every Canadian the option of having an account at the Bank of Canada would solve the security issue for depositors, and would avoid the considerable expense of extending insurance to all deposits regardless of amount.
But are Canadian banks and their investors now significantly disadvantaged if one central bank accepts government bonds as collateral at par regardless of market value while the other doesn't? Your thoughts as always would be appreciated.
Mike