A few U.S. banks and one significant European bank collapsed or were in danger due to recent instability in the global banking industry. As a result, market observers were apprehensive and worried about a domino effect similar to the one that caused the global financial crisis of 2008 after Silicon Valley Bank (SVB) collapsed and two other regional institutions, First Republic and Signature Bank, came dangerously close to going bankrupt.Â
Credit Suisse, one of the biggest banks in the world, recently failed as well. The common thread in these banking crises was the lack of confidence, which led to a loss of faith by depositors and caused a bank run. Regulators worldwide are trying to contain the spread to prevent the collapse of other banks. However, lawmakers have pushed back the idea of a global financial crisis like in the late 2000s. Moreover, the issues that caused the 2008 crisis are not present now. Therefore, the Canadian banking system is far more secure, diversified, and regulated than the U.S. or Europe, so Canadians don’t have much to worry about. However, concerns about a slowdown in economic growth could impact Canadian trade. Weaker GDP growth in the U.S. doesn’t bode well for Canadian exports. Therefore, there are many grounds to believe that the Bank of Canada won’t start raising interest rates again and will likely keep the status quo or can even drop rates in the time to come. Â
The Canadian economy was expected to enter a recession in 2023, and new developments may cause it to fall much further. But, given that many job markets do not accompany the current slowdown, any future recession will differ from previous downturns. In addition, the job market is a significant shock buffer; therefore, this recession will vary for most Canadian households.