You’ve probably already heard about the recent collapse of Silicon Valley Bank; but why and how did this happen?
The low interest rates and the booming stock market in 2021 led to rapid growth in total deposits for Silicon Valley Bank (SVB). In March 2022, SVB held nearly $200 billion in deposits - mainly from startups and venture capitalists. When interest rates were close to zero in 2021, the bank heavily invested the cash in treasury bonds. However, the recent rise of interest rates caused the bond values to decrease. Growing client concerns prompted a massive wave of withdrawals resulting in a loss of confidence and a run on the bank. Shortly after, two other significant US regional banks suffered large losses in deposits eventually causing a collapse. The consecutive bank failures have drawn attention back to the 2008 financial crisis that led to a recession- leaving investors, customers, and regulators in a state of panic.
Canada’s banks on the other hand are in better shape despite a plunge in bank stocks in response to SVB’s collapse. Compared to the thousands of banks in the US, Canadian banks are dominated by the Big Six and follow tighter regulations. In addition to having nationwide branch networks with a diversified client base, they are able to maintain enough capital to sustain large losses. Following the SVB failure, the Office of the Superintendent of Financial Institutions (OSFI) is closely monitoring the liquidity of Canadian banks on a daily basis.
In addition to the three recent US bank failures, the Credit Suisse crisis adds further concern - forcing central banks to prioritise alleviating fears within the market over fighting inflation.
According to chief economist Dr. Sherry Cooper, “this could ultimately be a monumental buying opportunity for the stocks of all the well-managed financial institutions out there. But beware, markets are impossible to time, and being too early can be as painful as missing out.”
Amendments to the Foreign Buyers Ban
At the start of January 2023, the Prohibition on the Purchase of Residential Property by Non-Canadians Act came into action. However, amendments to the foreign buyers ban were made on March 27, 2023 to allow more flexibility for newcomers and non-Canadians.
Effective immediately, the amendments made to the foreign buyers ban are as follows:
Work permit or work authorization holders may purchase a home to live in while working in Canada. At the time of purchase, the work permit or authorization must have over 183 days of validity remaining.
Non-Canadians may purchase vacant land zoned for residential and mixed use.
Non-Canadians may purchase residential property for the use of developments.
Privately held corporations or entities will be considered foreign if a non-Canadian owns 10% or more of the entity’s equity value or voting rights - an increase from the previous control threshold of 3%.
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