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EQ Bank now 2.3% (up from 2%)
May 7, 2017
8:14 am
Norman1
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Loonie said

But, wouldn't that be on top of your numbers (1) and (2), i.e. 1.25%, making it more like 2.5 + 1.25 = 3.75%? Or are (1) and (2) one-time costs? If the latter, how would you account for them in the total rate, to be realistic about what it would be costing Equitable? Or are you just not including them because they're stuck with these costs regardless of wherever they get their money from? …

Item (1), the ¾% commitment fee, is one-time and up front on the $2 billion backstop. Equitable Bank pays that no matter what. So, it wouldn't affect their feelings going forward on where funds will be from.

Items (2) and (3) are ongoing. Initially, as undrawn balance, Equitable Bank pays ½% per annum, according to item (2), on the $2 billion backstop. As the backstop is used, the used portion moves from item (2) to item (3): Banks' cost of the advanced funds plus 1¼%.

That "Banks' cost of funds" refers to the cost of the funds to the banks in the syndicate supplying the funds.

What that cost is exactly is vague. I'm sure the actual signed agreement is more specific. But, I'm not sure Equitable Group made the full agreement public.

If the funds being advanced are from banker's acceptances, then the fund cost would be around 0.8%. If the funds are from branch two-year GIC's, then the cost maybe something like 1.05% GIC rate + ¼% branch commission + 0.065% CDIC insurance premium = 1.365%.

May 25, 2017
5:48 am
danw17
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JustMe2016 said

who's gonna pay you that rate if the FI isn't there anymore??? 

CDIC. Up to 100k$ per financial institution, with some other rules regarding joint accounts and registered accounts.

May 25, 2017
10:28 am
Bill
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danw17, not sure what CDIC rate you're referring to as CDIC pays no interest. It covers (up to $100k) your accrued interest and principal on your savings vehicle until date of FI default, nothing after that.

May 25, 2017
2:49 pm
Doug
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With EQ Bank's maximum balance (plus accrued interest) limitation per customer, to me, I see this as an absolute "no brainer" that truly is zero risk. Your deposits are fully protected by CDIC in the event of a financial institution failure for which there was no buyer up to the $100,000 per depositor limit. If there was a buyer, and I'm 99.995% sure there would be, CDIC and OSFI would mandate any buyer to assume all deposits regardless if over the CDIC limit or not. 🙂

Plus, EQ Bank is a very safe bank, as is Home Trust/Home Bank. 🙂

In short, stick within your CDIC limits in these cases and you have zero risk. You could also go into a 1-5 year GIC with either financial institution and even then, it's extremely low risk, with your only assumed risk being interest rate risk. 😉

Can we not "put to bed" all the negativity and constant re-posting of Home Capital Group liquidity update press releases? It's turning me (and likely others) away from this forum. 😉

Cheers,
Doug

Full & Fair Disclosure: I hold 5000 shares of Street Capital Group, Inc., parent company of Street Capital Bank of Canada, now for the long term as of 2017. I also hold 100 (or so) shares each of The Bank of Nova Scotia and Canadian Imperial Bank of Commerce and 200 shares (or so) of The Toronto-Dominion Bank, which I have held since or around 2008 and plan to hold for 30+ years.

May 25, 2017
6:11 pm
Top It Up
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Doug said

If there was a buyer, and I'm 99.995% sure there would be, CDIC and OSFI would mandate any buyer to assume all deposits regardless if over the CDIC limit or not. 

Readers should be reminded that this is an anonymous comment forum and as such, you'd be advised to carry out your own thorough due diligence when it comes to personal finance.

May 25, 2017
8:50 pm
User230
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CDIC doesn't cover fraud.

It's unlikely they would be able to hide fraud from the authorities.

I'm not suggesting any fraud occurred.

But that is one way that you cant be 100% certain your money is okay. You should only bank with companies you trust.

Trust meaning you have done research. As the above poster explained.

May 26, 2017
3:57 am
Loonie
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I find it unimaginable that anyone, no matter how diligent, could protect themselves from fraud perpetrated by rogue bank employees or officers.

Nick Leeson comes to mind. No doubt, if Baring's, which was at that time considered a very solid bank, "banker to the queen", knew what he was up to, they would have sacked him immediately. But they didn't. The regulators didn't. And certainly your average diligent individual didn't. For those who aren't old enough to remember, this was one of the biggest bank frauds in history, and took EVERYONE by surprise. https://www.theguardian.com/business/from-the-archive-blog/2015/feb/24/nick-leeson-barings-bank-1995-20-archive

Ultimately, it's not about "trust". It's about regulation, enforcement, and vigilance. The banking system is far too complicated for any of us to be able to detect fraud that has not been noticed by any regulator. We have no choice but to put our "trust" in regulatory systems. Our vigilance would be better directed towards being watchful about keeping them strong than trying to analyze whether there is going to be fraud at the bank.

May 26, 2017
5:54 am
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Loonie said

No doubt, if Baring's, which was at that time considered a very solid bank, "banker to the queen", knew what he was up to, they would have sacked him immediately. But they didn't. The regulators didn't. And certainly your average diligent individual didn't.   

The reason why no one sacked Leeson, was abundantly clear - from the cited article above -

Leeson did make Barings vast sums. In 1993, he made £10m - 10% of the bank’s profits for that year.
...

Barings’s investors also lost out. Their misery was compounded on hearing that the bank’s directors would still be getting large bonuses.
...

...chancellor, Kenneth Clarke, ... presented an eagerly awaited Bank of England report to the Commons. The report, as expected, said that Barings’s fall ‘came from unauthorised and concealed trading positions,’ and ‘serious problems of controls and management failings within the Barings group.’

They, Baring's, let him run to failure, no questions asked - hoping there would be NO failure.

May 26, 2017
2:56 pm
Loonie
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No, it's not "abundantly clear" at all. It's not even apparent.

It was Leeson himself who held the unauthorized positions. "Unauthorized" means Baring's did not sanction them.

Internal controls were certainly lacking, and that is why British authorities subsequently overhauled their regulatory system. It's obvious you can't depend on any bank to police itself. That was my point, that we need to look at tightening regulatory systems. Same issue with mortgages here now.

All organizations want to be left to police themselves, but it is never adequate. Compliance takes time and money and detracts from the bottom line, so you can expect them all to fight it, but it's what's best for consumers.

May 26, 2017
5:18 pm
Bill
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Based on my work experience, I saw zero evidence that folks in the public sector or in regulatory positions are less corruptible, when presented with opportunity, than those in the private sector. I don't share the confidence some have in the "authorities".

May 26, 2017
7:24 pm
User230
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Bill said
Based on my work experience, I saw zero evidence that folks in the public sector or in regulatory positions are less corruptible, when presented with opportunity, than those in the private sector. I don't share the confidence some have in the "authorities".  

This is very true. A little hush money could cause I large fraud. Hard to determine which banks would deal like this. Home Capital not disclosing things to investors really scared me away from ever doing business at Oaken or Home Capital. Even if it's really not a completely rational fear (based on solid facts).

May 27, 2017
2:28 pm
Loonie
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Let's not slam the public service on the basis of some unspecified and undocumented personal experiences. I'm sure we can all think of something, good or bad.
The point is not whether certain individuals are corrupt or corruptible. Protecting the public is not the job of corporations, whose primary job is to make money for shareholders in whatever way they can get away with while trying to convince us to be "loyal" to them. Checks and balances require that there be stringent controls in place to protect the public. At the first level this involves regulation. If there is nothing to enforce, then it's the "wild west" out there and you'd better hide your money under the mattress.

May 27, 2017
2:32 pm
Top It Up
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wow ...

socialism is good, capitalism is bad

... yeah.

May 27, 2017
3:02 pm
Loonie
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Top It Up said
wow ...

socialism is good, capitalism is bad

... yeah.  

If that's what you think, then you have a lot to learn about both.

If what you intend is sarcasm, that has no place in this forum.

May 27, 2017
3:37 pm
Jon
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Loonie said
Let's not slam the public service on the basis of some unspecified and undocumented personal experiences. I'm sure we can all think of something, good or bad.
The point is not whether certain individuals are corrupt or corruptible. Protecting the public is not the job of corporations, whose primary job is to make money for shareholders in whatever way they can get away with while trying to convince us to be "loyal" to them. Checks and balances require that there be stringent controls in place to protect the public. At the first level this involves regulation. If there is nothing to enforce, then it's the "wild west" out there and you'd better hide your money under the mattress.  

You are very correct because information take some time to spread and register in the mind of people, so it may not be reasonable to just rely on intervention from the market via the form of monitoring from large institutional investor or activist shareholder.

May 27, 2017
4:58 pm
frank87
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User230 said

This is very true. A little hush money could cause I large fraud. Hard to determine which banks would deal like this. Home Capital not disclosing things to investors really scared me away from ever doing business at Oaken or Home Capital. Even if it's really not a completely rational fear (based on solid facts).  

FYI, they did disclose. The OSC's rift with them is their timeliness of disclosure.

May 27, 2017
6:49 pm
Bill
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Loonie, perhaps sarcasm is not welcome to you, but I'm ok with it - whereas I don't welcome it when someone tells someone else he or she might have a lot to learn about a topic if they hold a certain opinion about it. So due to the myriad of differences in personal tolerances, I suggest we not tell others what has or hasn't a place here, and leave it to Peter to intervene when he feels it's needed. Thanks.

May 28, 2017
8:06 pm
Joe
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nothing wrong with a little sarcasm IMO....it keeps things light.

Tangerine....Canada's best bank. LBC.............Canada's 2nd best bank.
Hubert.....worst bank in Canada.

May 29, 2017
7:51 am
NorthernRaven
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User230 said
CDIC doesn't cover fraud.

It's unlikely they would be able to hide fraud from the authorities.

I'm not suggesting any fraud occurred.

But that is one way that you cant be 100% certain your money is okay. You should only bank with companies you trust.

Trust meaning you have done research. As the above poster explained.  

You have seriously misunderstood CDIC's "fraud not covered" concept. If a Nigerian prince convinces you to send him all your deposits, he has committed fraud on you, and CDIC obviously will not cover your losses. If a teller at Bank X somehow siphons your money away, it will be up to you and the institution and other authorities to work things out - the bank is solvent and CDIC isn't involved.

But if some latter day Nick Leeson manages to blow all of Bank X's money (whether as an employee or external scammer), no matter how, and they can't redeem their liabilities, CDIC is ultimately responsible for the repayment of all legitimate deposits within their limits, no matter how Bank X gets into an insolvent position, whether fraud, stupidity or little green martians. It is effectively a blanket guarantee.

May 29, 2017
7:59 am
NorthernRaven
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frank87 said

FYI, they did disclose. The OSC's rift with them is their timeliness of disclosure.  

My understanding from the OSC allegations document is that an HGC vice-president went through Home's own Whistleblower/ethics procedures in early June 2015 to indicate to the board that he believed HGC was in violation of disclosure rules. HGC finally went public July 10 (causing a major drop in the stock price); what public statement (if any) they might ever have made had their hand not been forced by the "whistleblower" is unknowable.

The OSC position is that the facts known by February 10th required disclosure then; they also indicate that the July 10 disclosure was not sufficiently informative.

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