Here is some background information to contextualize the situation and answer your clients' concerns following the Silicon Valley Bank collapse.
- Strict regulations in Canada
First, it is important to note that the financial regulation environment in Canada is stricter than in the United States. Canadian banks are also very well capitalized and are considered safe havens given their strong deposit base and the regulatory scrutiny they are subject to.
In addition, unlike the U.S. regional banks affected by the bank run, Canadian banks are required to undergo what are known as "stress tests" and must meet rigorous capital ratios. These tests allow authorities to ensure that our financial institutions are robust and can handle various scenarios that could shake the economy, such as a sustained rise in interest rates.
This allows us to see in advance what the main impacts would be for each scenario and to prevent potential complications up front.
- Diversification
There are over 4,550 regional banks in the U.S. that, in addition to being subject to more limited regulation, tend to specialize in certain types of assets and operate in more specific geographic areas. The Silicon Valley Bank, for example, focused its business primarily in the Californian technology industry.
The Canadian banking system however is dominated by a few large banks that are closely monitored by regulators. These banks are therefore required to have excellent asset diversification and balanced portfolios in terms of loan types and other financial assets. They must also be properly diversified both geographically and in the economic sectors they invest in.
These requirements reduce their vulnerability to market fluctuations and to the effects of unexpected situations that might occur, such as the collapse of Silicon Valley Bank.
- iA Financial Group's solidity and the diligence of its leaders
iA Financial Group has been in the Canadian financial industry for over 130 years. The company stands on a solid foundation. It is managed by experienced executives who are committed to ensuring strict compliance with the regulatory frameworks in place.
As an institution specialized in savings and insurance, iA Financial Group also has a solid reputation in risk management. While aiming to generate returns for its clients, the company is very prudent in its operations and investment management. It also ensures that its assets are well diversified, making it less vulnerable to economic shocks.
Finally, its expert teams are constantly monitoring the markets, especially those with risky assets, and can act quickly if events such as those observed in the United States occur. They also keep a close eye on the current situation and are on the lookout for favourable opportunities that could allow them to take advantage of the market's behaviours.
For more information, we recommend listening to our Chief Strategist and Senior Economist Sébastien Mc Mahon's podcast on the subject.
Don’t hesitate to share it with your clients!
