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Saving account limit increase + number of GICs increase
September 26, 2018
11:15 pm
Loonie
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I don't think it's wise to put too much faith in DBRS ratings.
Like Norman said, things can go sour quickly and unexpectedly, with very serious consequences, and are not predicted by DBRS ratings.

September 27, 2018
4:11 am
canadian.100
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Loonie said
I don't think it's wise to put too much faith in DBRS ratings.
Like Norman said, things can go sour quickly and unexpectedly, with very serious consequences, and are not predicted by DBRS ratings.  

DBRS ratings are surely better than nothing! There are no ratings for the Manitoba Credit Unions and there should be; for sure, some of the Manitoba Credit Unions are not as sound and stable as other Manitoba Credit Unions. I would want to stay away from the marginal ones same as I would have stayed away from Home Group and Oaken when they were having their issues and were downgraded by the rating agencies.

September 27, 2018
5:46 am
Loonie
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Each to their own, but when you decided to stay away from Oaken/Home Capital because of their internal crisis and consequent low ratings from DBRS, I think you missed an opportunity. Nobody else was offering 3.5 over five years in 2017. HCG remained CDIC-insured, and nobody is suggesting going beyond those limits. Personally, I was happy to collect my interest last July.

I don't know what the basis is for claiming that some MB CUs are weak, but they all have to meet the standard of their insuring agency. If one should go down, the others will scoop it up. I don't see that there is much to worry about unless the whole system goes down, in which case all financial institutions will likely be affected.

September 27, 2018
10:05 am
Norman1
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canadian.100 said

DBRS ratings are surely better than nothing! There are no ratings for the Manitoba Credit Unions and there should be; for sure, some of the Manitoba Credit Unions are not as sound and stable as other Manitoba Credit Unions. I would want to stay away from the marginal ones same as I would have stayed away from Home Group and Oaken when they were having their issues and were downgraded by the rating agencies.  

Ratings from agencies, like DBRS, S&P, and Fitch, are quite useful. The ratings are informed estimates of risk. The ratings agencies are given access to non-public information about the loan books. So, they have access to better information than public investors.

There will be differences in risk between the individual Manitoba credit unions. However, it might turn out that the riskiest ones would be rated A(low) rather than BBB(low)!

Deposit insurance does not insure the availability of the funds at maturity. So, the risk can be more important than the deposit insurance. That's why many large companies deposit the next month's payroll money with the Big 5 banks for little or zero interest. The availability of that payroll money on a certain date is much more important than the extra interest paid by some of the lower-rated institutions.

The same applies if one is relying on the monthly interest payments from a GIC to pay for living expenses, as opposed to letting the interest compound until maturity in five years.

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