Financial Institutions and Markets Key

Financial Institutions and Markets

Key findings or highlights of the article

The Canadian financial system is strong and will withstand the depression.

The capital and liquidity of banks and non-financial corporate sector is stable.

Major risks emanate from overseas positions and not from domestic economy.

Impact on the Canadian or global financial system

There are high monetary risks in the whole international financial system.

There are future risks in Europe that may create debt and reversal in currency indices.

The banks operating on a global scale from Canada face very great risks.

Money markets in the global scenario require infusion of capital and its quantum is yet to be assessed.

Corporate debt markets also are low in investment and low demands in aggregate.

Regulatory or public policy implications

The global banking sector is not healthy to prevent collapse a fall back fund and capital to tide over the poor interest rate, maturing debts and finally credit demands is to be created.

Canada must also implement the strategies proposed at the G20 Summit.

The net stable fund ratio and the fall back fund and capital to tide over the poor interest rate, maturing debts and finally credit demands are to be created.

4. The critique of the article - what do you feel are its strengths and weaknesses

Too much emphasis is placed on the international monetary scenario

There are inherent risks for all financial institutions but the Canadian banks are claimed to be robust while at the same time claiming that they may also collapse on international cues.

Solutions are sketchy and are not shown in application to the Canadian situation.

1. Key findings or highlights of the article

The report claims that the Canadian financial system can be affected by the balance of payments position and also the debts of other nations. The fiscal problems can be caused in Europe and have global repercussions Thus indirectly through the international monetary order and directly by investment overseas, the Canadian banks could be affected and this future risk exists.

Interest rates are at low thus indicating excess credit available in the advanced nations, and in Canada this aspect of lower interest rate ought not to be encouraged because it will cause Banks to create non-paying loans and investments. The Canadian financial system is strong and there is an assured liquidity of banks and non-financial corporate sector but the probable impact of overseas developments cannot be yet predicted. However the future is not without risk and this risk is two fold, one from the global condition and the other from within the internal financial market.

2. Impact on the Canadian or global financial system

There are high monetary risks in the whole international financial system and it is in chaos. Added to that, the problems in Europe may snowball into a major balance of payment position and reversal in currency indices. This may cause future problems to banks and institutions that operate on a global scale and are at the risk of facing acute financial dilemmas in the near future. A dilemma for the sector for example is that in most countries there are debts that are due to mature in the next 2 years. This will create pressures in the bank funding by that time. This applies to Canada too. Further liquidity in the capital market will also go down because corporate debt markets also are low in investment and low demands in aggregate.

3. Regulatory or public policy implications

The global banking sector is not healthy to prevent collapse a fall back fund and capital to tide over the poor interest rate, maturing debts and finally credit demands is to be created. Canada must also implement the strategies proposed at the G20 Summit. Further the plan envisages the creation of a net stable fund ratio and the fall back fund and capital to tide over the poor interest rate, maturing debts and credit demands. This can be followed in principle. Therefore the G20 summit strategies like a buffer capital can be a viable solution.