Canada’s banks, ranked the soundest on the planet by the World Economic Forum, aren’t immune to collapses triggered by falling housing prices
Contents contributed and discussions participated by Kevin Mao
Canadian banks not immune to housing bubble: OSFI official | Mortgages | Personal Finan... - 0 views
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Previous failures of Canadian financial institutions were due to bad real estate lending and sharp falls in housing prices, and these can happen again
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“Just because nothing happened in Canada in 2008 (a U.S.-centered crisis), does not mean that Canada is not vulnerable to a housing correction now.”
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Are low interest rates causing low savings rates? | Fox Business - 0 views
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recent study found that nearly half of American workers are not contributing to any form of retirement plan.
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People who fail to save money will pay for their short-sightedness in the future, but the decline of savings can also be seen as a logical response to a low-interest-rate environment
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49 percent of respondents said they were not contributing to any retirement plan
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Banking rules may encourage riskier trading, warns ratings agency | Business | The Guar... - 0 views
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29 biggest banks in the world could be encouraged to embark on riskier trading activities
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The 29 banks are deemed to be global systemically important financial institutions
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agency also warned that borrowing costs for customers could rise as banks try to maintain their profitability
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JP Morgan (JPM) and Systemic Risk - 0 views
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On Thursday we learned that JP Morgan has lost over $2 billion in the space of two weeks
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stock price fell by 9.3%, wiping out $14.4 billion of the company’s value
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How do you lose so much money so quickly? The short answer is, leverage.
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BofA to try converting foreclosures into rentals - Los Angeles Times - 1 views
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Bank of America Corp. has tentatively joined a nascent housing industry movement in which homes in or near foreclosure are sold to investors as rental properties.
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often would be better for homeowners, communities and the banks themselves to keep troubled borrowers on as renters rather than kick them out
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Bank of America doesn't plan to become a longtime landlord for borrowers turned tenants
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http://www.investopedia.com/terms/s/shadow-banking-system.asp
2. The amount of debt used to finance a firm's assets. A firm with significantly more debt than equity is considered to be highly leveraged.
Leverage is most commonly used in real estate transactions through the use of mortgages to purchase a home.
Leverage helps both the investor and the firm to invest or operate. However, it comes with greater risk. If an investor uses leverage to make an investment and the investment moves against the investor, his or her loss is much greater than it would've been if the investment had not been leveraged - leverage magnifies both gains and losses. In the business world, a company can use leverage to try to generate shareholder wealth, but if it fails to do so, the interest expense and credit risk of default destroys shareholder value."
http://www.investopedia.com/terms/l/leverage.asp#axzz1vAKg26eK
Derivatives are contracts and can be used as an underlying asset.
Derivatives are generally used as an instrument to hedge risk, but can also be used for speculative purposes."
http://www.investopedia.com/terms/d/derivative.asp#ixzz1vBC9gCij
It is important to note that hedging is actually the practice of attempting to reduce risk, but the goal of most hedge funds is to maximize return on investment. The name is mostly historical, as the first hedge funds tried to hedge against the downside risk of a bear market by shorting the market (mutual funds generally can't enter into short positions as one of their primary goals). Nowadays, hedge funds use dozens of different strategies, so it isn't accurate to say that hedge funds just "hedge risk". In fact, because hedge fund managers make speculative investments, these funds can carry more risk than the overall market."
http://www.investopedia.com/terms/h/hedgefund.asp#ixzz1vByyH1LE
A stress test is also used to evaluate the strength of institutions. For example, the Treasury Department could run stress tests on banks to determine their financial condition. Banks often run these tests on themselves. Changing factors could include interest rates, lending requirements or unemployment."
http://www.investopedia.com/terms/s/stresstesting.asp#ixzz1vBzp5bjc
http://www.investopedia.com/terms/h/housing_bubble.asp#ixzz1vC0IXE81
http://www.thecanadianencyclopedia.com/articles/nationalization
http://www.investopedia.com/terms/s/systematicrisk.asp#ixzz1vC39Tdft
http://www.investopedia.com/terms/m/moralhazard.asp#ixzz1vC3Kyeck
http://www.investopedia.com/terms/p/primerate.asp#ixzz1vC61RBXn
http://www.investopedia.com/terms/p/proprietarytrading.asp#ixzz1vC6yJ52J
2. The amount of ownership a stockholder has in a company, usually expressed as a percentage.
Interest is commonly calculated using one of two methods: simple interest calculation, or compound interest calculation."
http://www.investopedia.com/terms/i/interest.asp#ixzz1vC730cbi