Recession prep: Canada’s largest banks set aside billions
Expecting more Canadians will be unable to pay off loans and credit card debt as the country heads into a potential recession, Canada’s six largest banks have put aside a combined total of more than $2.4 billion to cover possible losses.
“Unfortunately some people can not repay loans that they have taken out,” Laurence Booth, a professor of finance at the University of Toronto’s Rotman School of Management, told CTVNews.ca. “This happens regularly but it tends to spike when we go into recession and people lose their major source of income, such as their employment or small business income. ”
Known as provisions for credit losses, or PCLs, the $2.49 billion in reserves were outlined in recent first quarter results posted by Canada’s six largest banks: the Royal Bank of Canada, TD Bank, Scotiabank, BMO, CIBC and National Bank.
This marks a significant increase from the $373 million the six banks allocated for PCLs a year ago, during the first quarter of 2022. Around the same time in March 2022, the Bank of Canada began its attempt to tame inflation by hiking the interest rates, which climbed from a historic low of 0.25 per cent to 4.5 per cent today – the highest it’s been since 2007.
“Currently with the Bank of Canada pushing up short-term interest rates to slow down the economy, and bring inflation down, the expectation is for a recession in Q2 or Q3 this year,” Booth explained. “Consequently, the banks are making provisions for potential losses should a recession occur.”
In recent Q1 earnings conference calls, bank executives said high employment and savings should help avert a large increase in payment defaults, which fell during the pandemic. Rather, they widely expected a “normalization” driven by interest rate hikes and inflation, with loans and credit card debt expected to be the most impacted.
“Current underlying conditions, particularly the strong level of employment and consumer savings, are supporting a slower rate of normalization of impaired PCLs than we had expected,” National Bank executive vice-president of risk management William Bonnell said during a March 1 earnings call. “The same factors we discussed last year – inflationary pressures, geopolitical risks, and the direction and timing of interest rate changes – are still present and all contribute to a less certain outlook.”
Stunned faces and heartbreak for migrants heading to Roxham as they learn Canada will likely send them back – CBC.ca
At 4 a.m. on Saturday morning, two buses from New York City arrived at a gas station in Plattsburgh, N.Y., where groups of migrants carrying luggage and determined to cross into Canada disembarked with no knowledge of the closure of Roxham Road.
Their faces were stunned as two taxi drivers, who had shown up only to give them the news, told them they could not drive them there.
They were four hours too late. They had boarded the buses unaware that by the time they arrived in the town of Plattsburgh, 30 km from the illegal border crossing, they wouldn’t be able to walk in the footsteps of the nearly 50,000 migrants who made it over in the last year and a half.
The temperature was –4 C and several of the migrants wore only hoodies. They shivered and looked at each other in disbelief, pleading with the drivers to take them to Roxham Road anyway. The drivers said a United States government directive had come down that they were not to drive them to the illegal crossing after midnight.
Olivier Nanfah, a 42-year-old Cameroonian man, said he had spent his entire savings crossing more than a dozen countries to flee persecution, then trying to find work in the U.S. before he decided to try his luck in Canada, only to be told his last hope, Roxham Road, was closed.
“It’s awful. I have nowhere else to go,” he said.
Nanfah and a dozen other migrants from countries including Ecuador, Haiti and the Democratic Republic of the Congo gathered in another gas station next door to warm up and try to understand their predicament.
Eventually, at around 6 a.m., some taxi drivers agreed to take most of the migrants who arrived by bus to Roxham. Nanfah and several others crossed Saturday morning, but, according to the details of the modified Safe Third Country Agreement (STCA), announced Friday, they could be brought back to the U.S.
Nanfah said he wanted his story to be told so people could understand the hardships asylum seekers crossing at Roxham have faced.
After Nanfah’s father was killed in a nearby village, he said it became clear he and his family would be targeted. Nanfah walked from Cameroon to Equatorial Guinea in two weeks, then got a visa to fly to Brazil. He then made his way north on foot and by bus to the United States. He crossed the Darien jungle, where three of the 25 people in his group died because of how taxing the trek was.
“I saw people die in front of me,” Nanfah said, people who were younger than him — 28, 35, around those ages, he said.
His wife and 11 kids are home in Cameroon, hoping they can come join him once he finds a safe place for them all. The couple’s eldest, a daughter, is 18, their youngest: twins barely a year old.
Nanfah hasn’t seen them in nearly two years.
“No one should have to not see their family like this, no one,” he said.
The last hours of Roxham Road
Earlier in the evening, shortly after the changes to STCA were announced and scheduled to take effect at midnight, Roxham Road was quiet.
Groups of people continued to arrive as they had for the past weeks, months and years. Few knew then that the crossing would be barred off by midnight and how lucky they were to arrive when they did.
At 6 p.m., a black SUV with New Jersey plates came speeding down Roxham Road on the United States side of the border. A group of 11 Turkish men got out and rushed down the dirt path where an RCMP officer informed them they would be arrested for crossing illegally. They nodded and were led to a ramp outside a warehouse building where they’d be processed before being driven to a shelter by bus.
A man named Kenny Gas, a mechanic and Uber driver who lives on Staten Island, had driven them from an airport outside of New York City.
“It’s not right, what they do,” Gas said of the deal between Canada and the U.S. to effectively close the popular illegal border crossing for migrants south of Montreal.
Originally from Turkey, Gas has been driving Turkish migrants to Roxham Road from New York, who hear about him through word of mouth.
“They spent all that money to get here. Now, all of a sudden they’re closing their doors,” he said.
After that, the trickle of cars became a stream. People from Afghanistan, Kazakhstan, Botswana, Malaysia, Venezuela, Sri Lanka, Democratic Republic of the Congo, Chad, Colombia and Haiti — families, single men, mothers alone with their young children.
One woman, Pamela Memengi Maiala, arrived carrying her four-month-old baby in a car seat and her five-year-old, Jefte, at her side. Jefte waited with the baby as she went to get their roughly 10 suitcases and bags.
Several people scrambled to help carry them the rest of the way, but once she got to the little dirt path, Maiala stopped.
One group of migrants passed her by, walking onto the path without hesitating, but Maiala stayed put with the baby and Jefte at her feet. She didn’t move forward for about 30 minutes. She stared at the RCMP agent on the other side, at the people waiting outside to be processed, rubbed Jefte’s back and adjusted his jacket hood. Every once in a while she drew deep sighs, answered questions from journalists, but her expression stayed the same — as if playing back her and her children’s journey up to this point.
Maiala’s responses were brief. She spoke a bit of French and some Portuguese she had picked up in Brazil, the first country she and Jefte landed in on Oct. 23, 2021. Her first language is Lingala. The baby was born on their way north and she became sick from the pregnancy, she said. When she heard the path to Canada would be closing, she decided to pack up and make it in time for the deadline. Arriving was a relief, she said. At around 11:20 p.m., she picked up her things, her baby, joined a large group on the path and walked across.
Mahamed Yusef Niazi was carrying his seven-month-old daughter Sahaba, when he and his wife Taiba Nuri got out of a black van at the end of Roxham Road.
Niazi was smiling.
“I feel better in Canada,” he said, steps away from entering the country.
He explained that he and Nuri left Afghanistan after the Taliban regained control of the country. The couple first travelled to Iran, then back to Afghanistan, then to Pakistan, Brazil, through South America to Mexico and then the U.S. And at 9:02 p.m. Friday, they walked into Canada.
At midnight, two RCMP officers took the wrapping off of a new sign that said, “Stop. Do not cross. It is illegal to enter Canada from here. You will be arrested and may be returned to the United States.”
A van from Warwick, N.J., carrying six Haitian nationals pulled up a few minutes late. For a while, it wasn’t clear if the group would be let in. They were made to wait outside for about 30 minutes, before finally being let inside. One man from Pakistan showed up an hour later and a small group at 3:15 a.m., who were also let inside.
RCMP officers present would not say whether those people would be sent back to the United States after being processed in the warehouse.
Tyler Provost, a taxi driver from Plattsburgh, made two trips to the Roxham crossing Friday night. He shook his head opening the trunk of his van.
Provost said cab drivers had been given a directive from the U.S. government to stop driving migrants to Roxham after midnight.
“A lot of people have called us already crying and saying they can’t get here ’til, like, the 27th and stuff. So it’s just going to ruin a lot of people’s lives. It’s not. It’s not going to help,” he said.
Risk of a hard landing for Canadian economy is up, former Bank of Canada governor says – CTV News
Former Bank of Canada governor Stephen Poloz says Canada’s economy is at a greater risk of a “hard landing” — a rapid economic slowdown following a period of growth and approaching a recession.
Amid the central bank’s interest rate hikes intended to tame inflation, inflation cooled to 5.2 per cent in February. That’s down from 5.9 per cent in January, after 40-year record highs over the summer, reaching as high as 8.1 per cent in June.
Poloz told CTV’s Question Period host Vassy Kapelos — in a joint interview with former Liberal finance minister John Manley airing Sunday — the Bank of Canada and federal government’s efforts to rein in inflation are working, but the chances of a hard landing remain.
“The risk of a hard landing has definitely gone up, given that so much has already happened, and we’re still waiting for the rest of the effects of interest rate rises to work their way through,” he said, adding he is “heartened by the response of the supply side of the economy.”
“That’s really where a soft landing comes from,” he said. “It’s not fancy engineering on the part of the central bank. But as the supply side continues to grow — such as new entrants into the workforce, from immigration and from parents who are taking advantage of the new childcare policy — those kinds of things are giving us, coming up from below, strengthening the economy.“
While Poloz said the supply growth is a good sign, at this point it would require “some luck” to achieve a soft landing and avoid a recession.
Federal Finance Minister Chrystia Freeland meanwhile is set to table the budget on Tuesday.
She’s long been signalling Canadians can expect fiscal restraint to avoid stoking inflation, but also some significant investments. Namely, the government has been teasing targeted measures to help relieve the impacts of inflation, plus the already-announced $196 billion in health care funding for the provinces and territories over the next 10 years, and clean economy spending to help compete with the U.S. Inflation Reduction Act, which offers billions of dollars in energy incentives south of the border.
Poloz however called last year’s federal budget a “missed opportunity” to “have a different mix” of spending, and in doing so “lower the trajectory of the Bank of Canada’s interest rates.”
He said there’s now less risk government spending will counteract the impacts of the Bank of Canada’s interest rate hikes.
“I think we’re mostly beyond that point as an issue,” he said, adding last year would have been a more opportune time to stimulate the economy.
“That might have been better for everybody,” Poloz continued. “But that missed opportunity is behind us and now the economy is clearly slowing down. We got all that news in the fourth quarter, sooner than most people expected.”
“All the interest sensitive parts, such as housing and business investment, had been down three quarters in a row already, so in that sense, it feels recessionary already,” he added. “So in that sort of space, I think that business about causing inflation is off the table.”
With files from CTV’s Question Period Senior Producer Stephanie Ha
Questions raised about safety of Old Montreal building destroyed by fatal fire
MONTREAL — More than a week after a fatal fire tore through a building in Old Montreal, accounts from former tenants and victims of the blaze are raising questions about the safety of the heritage property.
Four bodies had been found as of Friday afternoon and three people were missing in the shell of the once-elegant greystone building.
Police and firefighters have said it’s too soon to say what caused the fire. But witnesses have raised questions about safety, including whether smoke detectors were working and whether there were proper emergency exits.
A rental tribunal decision shows that in 2012, the owner, Emile-Haim Benamor, blamed actions of a tenant for creating a risk of fire in the building. The comments are found in a Sept. 6, 2012, decision from Quebec’s Régie du logement, stemming from a dispute between Benamor and a tenant whose lease he was trying to end. According to the document, Benamor claimed the tenant was “manipulating electricity” and had “modified or added” electrical systems and overloaded the building’s circuits.
“The landlord insists that in the current state of things, the building is not profitable, he is unable to have access to the apartment … that there is a risk of fire and he says he is being monitored by insurance companies, especially since it’s a historic building,” the tribunal’s decision says.
The landlord also called a witness from the insurance company Lloyd’s, who testified that the unit presented safety concerns. In an affidavit included in the tribunal decision, Michel Frigon said the unit was not originally intended to be an apartment but rather a storage area. Frigon noted that access to the unit was required to perform maintenance of the building’s heating and electrical systems.
“The shower adjoining the electrical entrance to the dwelling presents a real danger of electrocution,” he added, saying a new insurer would likely have to be found if the problems weren’t fixed.
But in her written decision, administrative judge Jocelyne Gascon concluded there was little convincing evidence to suggest the tenant, Piotr Torbicki, was to blame for any electrical issues.
“The various electrical systems, although they appear to the court to be non-compliant, obsolete, the evidence offered did not establish that it was a recent addition,” Gascon wrote. She did not offer an opinion on Benamor’s comments about the risk of fire.
The building, known as the William-Watson-Ogilvie building, was built in 1890 and originally housed the offices of a flour company. It was gradually converted to residential use between the late 1960s and the 1980s, with the office of an architecture firm remaining on the ground floor. Municipal property records show Benamor, a lawyer, bought the building in 2009.
Since the fire, both the father of a missing woman and a former tenant have said at least one of the units had no windows or fire escape, while survivors of the fire have suggested the fire alarms never went off.
Louis-Philippe Lacroix said his 18-year-old daughter Charlie, who is presumed missing in the fire, called 911 twice within several minutes to say she was unable to get out of the unit she and a friend were staying in, which had no window and no fire escape.
A survivor of the fire, Alina Kuzmina, said that while the semi-basement unit she’d rented with her husband had fire alarms, she doesn’t remember hearing them go off. Kuzmina was able to escape the building by breaking a window and crawling out.
The owner this week responded to the claims through his lawyer, saying the alarm system was replaced in 2019 and regularly tested. Regarding the emergency exits, lawyer Alexandre Bergevin said the building’s layout is complex.
“It has always been deemed compliant in the past,” he said in a text message.
A former tenant spoke on condition that he not be identified, saying he fears reprisals from Benamor, who owns multiple buildings in the city. The former tenant said that in recent years long-term tenants have gradually left and been replaced by units rented on the short-term rental platform Airbnb. He also said some units had been subdivided, and at least one did not have windows.
Benamor’s lawyer, Alexandre Bergevin, said in an interview Friday that the short-term rentals in the building were the work of tenants and not his client. He said one person was renting seven units in the building and “illegally” listing them on Airbnb. He said that Benamor had told the person to stop the short-term rentals, and they had reached an agreement for him to leave the building by July 1.
“It’s a real scourge, it’s uncontrollable,” Bergevin said of the Airbnb rentals. “He had doubts on several tenants in several buildings, but it’s quite difficult to get the proof of all that.”
The lawyer acknowledged that one apartment in the building “didn’t have a window in the traditional sense of the term,” but it did have a skylight.
Asked whether the smoke detectors were working, he replied: “That’s an excellent question. We don’t know yet.” But he said there were detectors in all apartments, the central detector had been working the day before the fire and it would be surprising if all of them failed.
Bergevin said he was not aware of any specific electrical problems, including those raised in the 2012 rental tribunal decision, but noted that the building dates to the 19th century.
“It’s certain that it’s not the electricity we know today,” he said, adding that at certain points when issues arose, qualified electricians worked in the building.
Benamor, he said, has felt under attack since news broke that people had died in the fire.
“The public trial, while we have no idea of the causes of the fire, is causing him a lot of psychological distress,” he said.
This report by The Canadian Press was first published March 25, 2023.
Morgan Lowrie, The Canadian Press
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