The US and Switzerland banking crises resulted in the Canadian government granting itself unprecedented authority to prevent financial panic in Canada.. Daniel Blaikie NDP .“Why is it that government feels those authorities should be granted?” New Democrat MP Daniel Blaikie (Elmwood-Transcona, MB) on Thursday asked the Commons Finance committee..“There are some extraordinary powers being conferred to the minister of Finance in respect of the Canada Deposit Insurance Corporation,” said Blaikie..“Why?”.Bill C-47, a 430-page omnibus budget bill, amends the Canada Deposit Insurance Corporation Act, allowing the cabinet to guarantee deposits in case of a bank run to “the amount that the minister of Finance determines” if it is deemed “necessary to promote the stability or maintain the efficiency of the financial system in Canada.”.Federal insurance currently covers individual deposits to a $100,000 limit..“The thinking is that given the current situation and the banking turmoil we saw in the US and Switzerland, it was a prudent thing to do,” testified Rachel Grasham, senior director with the department of Finance..The bill follows the March 10 collapse of Silicon Valley Bank of Santa Clara, Calif., the failure of Signature Bank of New York on March 12 and the March 18 purchase of faltering Credit Suisse of Switzerland by rival UBS Group AG..According to Blacklock’s Reporter, Canada has not seen a bank run in 38 years.. Silicon Valley Bank .“The purpose of that is to really allow the minister and the government to bring forward a temporary measure under extreme circumstances, just to help promote financial stability and safeguard public confidence in the system,” said Grasham..“Can you describe for the committee the kind of circumstance that might trigger the use of this power?” asked Blaikie..“In the event there was instability, concerns around potential bank runs as we saw in the United States, the minister would be poised to be able to step in,” replied Grasham..The provision expires on April 30, 2024..Parliament in 2020 granted cabinet powers to nationalize any bank, credit union, trust or insurance company “if necessary” as a precaution against any COVID-related panic. The earlier measure was never used and expired Sept. 30, 2020..Canada has not seen a bank failure since the 1985 collapse of Alberta’s Canadian Commercial and Northland banks that cost the Deposit Insurance Corporation $608 million. Two other teetering institutions, the Bank of British Columbia and Continental Bank, merged with larger rivals..The failure of 36 mortgage and trust companies, including 17 federally-regulated firms from 1983 to 1987 left the corporation with a $1.25 billion deficit. Canada’s last uninsured bank failure was the 1923 collapse of the Home Bank of Toronto.
