The U.S. economic downturn will not affect Canada
Canada's banks are protected from the risks posed by the collapse of Silicon Valley Bank.
The collapse of the U.S.-based Silicon Valley Bank has raised concerns among investors about potential risks to Canadian banks, but analysts say Canadian banks are largely protected.
Mike Rizvanovich, an analyst at Keefe, Bruyette & Woods, says three main factors are a safety cushion for Canadian banks. They are a larger customer base with less lending in the technology industry, fewer problems with deposit outflows in Canada, and a higher loan-to-deposit ratio.
"It’s extremely low risk that you see anything of that nature in Canada," the analyst says.
Five of the six major Canadian banks ended Monday's trading day down. But the outlook for the future is positive: Canada's banking sector doesn't face significant risks.
By the way, there is a term for the largest six banks in Canada — the "Big Six". The term is used to describe The National Bank of Canada, Royal Bank of Canada, The Bank of Montreal, The Canadian Imperial Bank of Commerce, Scotiabank and TD Bank.
Compared to their U.S. counterparts, Canada's big six banks have not experienced comparable deposit outflows over the past few quarters. The aggregate loan-to-deposit ratio in the first quarter of 2023 was 82% among Canada's big six banks. By contrast, in the U.S., the ratio was 60%.
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