Almost Canadian

I am not going to disagree with anything you have said. But, in response to the poster above, to suggest that UK banks stand heads and shoulders above their Canadian counterparts is just complete tosh.

northeast canuck

Yes I can. When the Canadian government took $75 billion worth of CMHC's liabilities off it books. All that fuss lately about a $60 billion deficit in one year, and yet this baby just slips on by... Yes the premium is hefty, and that is largely where the $8 billion in the bank comes from. Against $600 billion of potential liability that's 1.3%. Of course none of this is a problem so long as prices remain where they are and there is no way that the liability will be the full $600 billion. But if property prices correct even a small amount it doesn't take a rocket scientist to figure out that we have a problem. The CMHC is not a publicly listed company like Freddie Mae or Fanny Mac were.

If you think about it it's either an ingenious system or it's a potential timebomb. Only time will tell which it is. Britain did not have such a system and as such the government had to nationalize some of the banks, in effect taking the banks bad liabilities onto its own books (ala Northern Rock). The Canadian government has a nice little system where the riskiest loans are actually backed by its own quango (the CMHC) and therefore no banks have to be implicated. Which is not to say that the banks didn't get themselves into a bit of bother, CIBC had big problems with American liabilities and BMO keeps hitting the headlines with potential downgrades, etc.

I never, ever, said that the British banks stood "head and shoulders" above the Canadian banks. That's an unfair assertion. Some of the people who run those banks should be in jail. But what I do believe, and this is just my opinion, is that the consumer-facing side of British banks is much better. We don't have to "buy" banking packs of so many cheques, withdrawls etc per month and we also have far, far greater choice in the marketplace. In Canada the competition is almost non-existent and therefore not much changes, except for the worse. When I was younger we did not have to pay for our banking here. Things changed back in the early nineties to what you see now. It is, what it is, but it wasn't always like this.

Almost Canadian

$600 billion. Are you seriously suggesting that every person in Canada is potentially in the shite to the tune of $20,000?

Again, CMHC has been in operation, I am led to believe, for 60 years, do you have any examples of it taking a large hit?

The "banking packs" that you refer to used to exist in England. I can remember the advert where the customer of (TSB) I believe, walked into the bank and told the manager he didn't want to have to pay for such things anymore.

I agree that there is very little competition between the Canadian banks, but there is very little competition between most things Canadian (airlines, professions, cell phone providers, insurance companies, in fact just about anything)

northeast canuck

I agree with you there (cell phone providers in particular)!

Yes, the Canadian public is, in theory, potentially in hock for that amount but in reality property prices will never drop to 0! But even a correction of 10% or more will cause mayhem and you will see it, I believe, in higher taxes. As far as I am aware there has not been a default on behalf of the CMHC but its liabilities have nearly doubled in just the past two years. Never in history has it been so critical to Canada's financial system. Have a look at the Globe article I posted the link to yesterday. This is not fringe stuff, it's real.

Alan2005

I wouldn't make that comparison either; there is no moral high ground. Banks behave in the way that they think they can get away within the regulatory framework they operate in.

Almost Canadian

Just as individuals do

Alan2005

It's a pity we as individuals don't get given a wad of tax payers cash when we screw up.

jimf

I read somewhere that Canada has % limits on foreign banks or subsidaries of foreign banks operating in Canada so it's hardly suprising that in terms of customer facing services or efficiency of back office operations it's behind the UK (and other countries with more open markets).

Also, 5 to 10 years ago weren't the Canadian banks desperate to merge with each other so they could "compete with the big boys on the world stage". It seems they were saved from themselves to a certain extent although not for the right reasons. Weren't the mergers stopped from going ahead for political reasons rather than any particular rationale for a low risk banking system?

Edna Bucket

Evan Davis podcasts are also available and worth listening to.

http://www.bbc.co.uk/programmes/b006sz6t

northeast canuck

You are right there - I believe the limit is 49%. This is also what has held back the airlines and the telcos over the years. The airlines used to have a limit of 25% although I believe that has recently been increased (or is scheduled to be increased) to 49% as well. This is why you do not see "Virgin Canada" here. Air 2000 ran into trouble when they started Air 3000 which they later were forced to offload to Canadian investors and rename it Canada 3000 because they ran afoul of the 25% law. This is one of the reasons the airline industry here is always lurching from one financial crisis to the next (even when times are good). The same with the telcos - there is currently an Egyptian firm trying to break into the Canadian cell phone market but they have the same issues with the ownership rules - I believe the CRTC are due to rule on it this month.

This is a double edged sword. The British government take the opposite approach. Sell the lot to anyone with the cash. A couple of weeks back the government announced it would sell the Dartford Tunnel. The Ontario Teachers Pension Plan owns whole swathes of the British infrastructure. Is this a good idea? Probably not. But the opposite is protectionism like we have here in Canada and consumers ultimately pay the price for this. I would rather see something in the middle.

Yes, back in the 90s the banks wanted to merge. In fact, I remember reading the headlines when the government prevented the merger - on my flight to Britain when I left. This was reported as sensational! A blow to the banks in the name of the consumer! These were very unloved institutions. "Unloved" is perhaps too mild a term for it - maybe reviled, or detested might be more accurate. They had been running a cash-grabbing campaign for a few years with their fees-for-everything approach to banking and had caused huge upset to the general public. So the banks were prevented from merging - but as you correctly suggest - it was for political reasons. People hated the banks. As it happens, it probably saved Canada from becoming one of these countries that has come unstuck with a banking sector magnitudes bigger than GDP. That's why I find it absolutely amazing to come back here over a decade later to find the banks being held up almost as "heroes". They are not, as Alan2005 has shown in his posts. They operate like any other bank - they will not think twice about bankrupting you or repossessing your home if you run into trouble. It hasn't happened to me but it has happened to friends and others close to me. This is why in my view banks are never something to be celebrated and definitely should never be taken at face value as so many people do.

jimf

I agree this is a double edged sword, however, British companies own foreign assets to a very great degree also which is good for those businesses.

A particular problem with the foreign ownership of assets in the UK is that in certain sectors British companies don't have the same access. Eg water and power utilities are open in the UK but there is no way British companies could buy up the same assets in France or Germany. It does seem as though the German and French utilities favour their home customers compared to those of the companies they own in the UK.

I'm not sure that the Ontario Teachers Fund itself owns that much British infrastructure. I remember it took a minority stake in Northumbrian Water when the French got out and it was relisted. Certainly various pension funds UK and foreign do own significant parts of the infrastructure though. I think the UK is probably too open in some respects. It doesn't really matter if foreign companies own paint factories etc but is it really in the national interest to have Heathrow owned by a foreign company?

BristolUK

My brother was a landlord in the UK and he had nothing but problems with tenants not paying rent.

I'm the owner of a duplex in NB. I have been let down by a couple of tenants but mostly it's been brilliant. Some seem almost grateful that you rent to them, although maybe that's because the standard of my accommodation is good and I allow their pets.

From what I've heard about renting in Ontario I wouldn't touch it there. Here, one of my tenants has been as much as two months (nearly three) behind and I've trusted her because she actually catches up.

It can be inconvenient but I'd rather get the money late than have to look for replacements, risking a vacancy in between.

Rete

Why would you back date a rent check? Do you mean forward date it?

It is illegal here in the states.

BristolUK

I issued a post dated cheque in the UK once (for a utility bill) and the recipient cashed it early and I went overdrawn.

The bank told me that they pay on a cheque when presented even when post dated, meaning the post dating of a cheque was irrelevant.

I assume that information was correct. In Canada it appears there is more appreciation of the intention behind post dating a cheque.

Alan2005

Yes it appears that way (from Steve_P's post earlier).