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Silicon Valley Bank’s collapse rattled the U.S. Now, Canada braces for aftershocks



The swift collapse of Silicon Valley Bank (SVB) has sent aftershocks through the global financial system and Canada is not immune from the impacts.

The Toronto-based branch of the startup-focused financial institution was temporarily seized by Canada’s banking regulator on Sunday night as Finance Minister Chrystia Freeland echoed her American counterparts in calling for calm in the face of market uncertainty and fears of contagion spreading to banks north of the border.

Experts who spoke to Global News on Monday said that most Canadians can be confident in the country’s banking system, but fallout from SVB’s collapse could be more substantial in some parts of the economy.


Here’s what to know.


Are Canadian banks vulnerable?

U.S. regulators were forced on Friday to urgently close California-based SVB after billions of dollars were withdrawn by fearful depositors, leading to a run on the bank. Silvergate Capital, which was known for its cryptocurrency-friendly operations, also shut down voluntarily late last week and Sunday saw U.S. regulators move to close New York-based Signature Bank.

Shares of U.S. regional banks slumped on Monday, led by sharp losses in First Republic Bank, spurring fears it could be next if a “contagion” emerges — the term referring to spreading instability through the financial system.

John Ruffolo, a Canadian venture capitalist with 30 years of experience in the technology industry, says the speed at which SVB went from normal operations to completely wrapped up was “shocking.”

“I am absolutely shocked at the swiftness of how the entire fiasco unfolded,” the founder and managing partner of Mavericks Private Equity told Global News on Monday.

Ruffolo says the weekend was “quite stressful” for many in tech, including himself, who were unsure how SVB’s operations would be wrapped up. Many customers in the U.S. were unsure if they’d get access to their deposits when banks opened again on Monday.

If SVB’s corporate and individual clients weren’t allowed to access their funds, Ruffolo said that would drive up the risks of contagion.

It was a major relief then, when U.S. Secretary of the Treasury Janet Yellen came out Sunday on CBS’s ‘Face the Nation’ to assure customers that they would be made whole after SVB’s assets were seized, he says.


“I was able to put my defibrillator away,” Ruffolo says, adding he was “very pleased” with the quick response from the Canadian federal government as well.

The Office of the Superintendent of Financial Institutions (OSFI) on Sunday night temporarily seized SVB’s operations in Canada.

In a statement, OSFI said the lender’s Toronto branch has been primarily lending to corporate clients, and that the branch does not hold any commercial or individual deposits in Canada.

Freeland said in a statement on Sunday night that she had spoken with Canadian financial sector leaders and the Bank of Canada, and that the country’s “well-regulated banking system is sound and resilient.”

Ruffolo agrees that at this juncture, it appears the risk of contagion in Canada is limited.

“From a Canadian impact perspective, unlike in the U.S., I would put the level of the impact at very low,” he said.

Money held in Canadians’ bank accounts is largely protected by the Canada Deposit Insurance Corporation (CDIC). The agency insures up to $100,000 of Canadians’ deposits at 86 member institutions in eight categories, for a possible total of $800,000 in coverage.

A CDIC spokesperson told Global News on Monday in an emailed statement that in over 55 years, “no one has ever lost a dollar protected by CDIC.”


What about the tech sector?

While most Canadians didn’t have much direct exposure to SVB, experts say the collapsed bank’s concentration in startups and the tech industry reveal vulnerabilities the sector will have to grapple with for months to come.

SVB was a “really important player in the startup ecosystem,” says Ray Newal, CEO of C100, a global community of tech investors and entrepreneurs.

“Regardless of your role in the tech community, it was a tough weekend. It was a very sobering moment for tech,” he tells Global News.

SVB was a “foundational partner” for C100 and would sponsor the group’s events in Canada, Newal says.

In addition to bringing together the community at events, he says SVB would play a pivotal role in providing reliable banking, investment and loans to many startups who otherwise would struggle to get access to such services at traditional institutions.

Without early-stage support from a lender like SVB or venture-focused offshoots like RBCx, startups with the potential to bring useful innovation to market might never get out of those early stages, Newal says.

“You need an ecosystem to make that happen. You need a banking infrastructure to make that happen. You need lines of credit and payroll services and a whole stack of different services to enable these startups to become viable. And that was the role that SVB really built,” he says.

Ben Bergen, president of the Council of Canadian Innovators (CCI), says the organization put a call out to its members over the weekend to get a gauge of how many are directly impacted by SVB going under; he pegs that number at under 10 per cent.

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But there’s going to be a “hangover” in tech related to SVB’s collapse, Bergen tells Global News, that could “exacerbate” challenges already facing the sector.

The tech industry has been hit hard as the economic outlook turns with fears of a recession hitting Canada and the U.S. in 2023. Many big names in tech, including Amazon, Microsoft and Canada’s Shopify have gone through heavy layoffs over the past year.

Bergen says it’s difficult to raise capital for early-stage companies trying to get off the ground right now, and the collapse of SVB — a go-to for many founders looking for a startup-friendly lender to get their start — will only make that harder, he argues.

While tech companies didn’t have bank accounts with SVB in Canada, the lender did provide a valuable loan guarantee to some of its Canadian clients, Bergen notes. This guarantee could give startups anything from a bit of flexibility on their finances to a lifeline when they needed it.

With SVB out of the picture, startups have less of a safety net should they face tough times ahead, he says.

“Firms don’t necessarily need that money immediately, but they often use it as a contingency or as a plan for when they are experiencing economic shocks or potential downturns,” Bergen says.

“So that’s also another piece where it’s not going to be felt immediately. But companies’ ability to be resilient, potentially, it’s taken a bit of a hit.”

Bergen says Finance Canada and Freeland’s office have been engaged with CCI from the beginning to ensure there’s stability in the sector.

Global News asked Francois-Philippe Champagne, federal minister of innovation, science and industry, if he has any concerns about knock-on impacts to the tech industry tied to SVB’s collapse, but a spokesperson declined to comment on Monday.


Market cuts rate hike bets amid uncertainty

The instability borne out of SVB’s collapse could ultimately drag down central banks’ interest rate paths, some market watchers are theorizing.

Wall Street flipped from losses to gains on Monday as expectations built that all the furor will mean the U.S. Federal Reserve won’t reaccelerate its rate hikes, as it had been threatening to do.

Such a move could give the economy and banking system more breathing space, but it could also give inflation more oxygen. Rate cuts also often act like steroids for the stock market.

Some investors are calling for the Fed to make cuts to interest rates soon to stanch the bleeding. The wider expectation, though, is that the Fed will likely pause or at least hold off on accelerating its rate hikes at its next meeting later this month.

That would be a sharp turnaround from expectations just a week ago, when many traders were forecasting the Fed would later this month hike its key overnight interest rate by 0.50 percentage points. That would put a tighter squeeze on markets and the economy after the Fed had just downshifted last month to an increase of 0.25 points from earlier hikes of 0.50 and 0.75 points.

A report from on Monday also pointed to a turnaround for the Bank of Canada’s rate decisions, shifting from a quarter-point hike in 2023 to a cut of the same magnitude at its next decision on April 12.

Policymakers at Canada’s central bank signalled last week that it would maintain its conditional pause on interest rate hikes, marking a possible peak for its tightening cycle.

With fears the U.S. Fed would continue to push higher, that led some observers to raise alarms about the value of the Canadian dollar diminishing, should the Bank of Canada’s key rate ultimately diverge from its counterpart south of the border.

Some economists speculated there would be pressure on the Bank of Canada to keep pace with the Fed to avoid a weaker loonie fuelling inflation on imports from south of the border, though a senior official with the central bank poured some water on that idea in a speech on Thursday.

Anil Kashyap, economics professor at the University of Chicago Booth School of Business, told Global News on Monday that while next week’s U.S. Fed decision may seem close, there’s still plenty of time for the fervour around SVB to diminish enough to avoid changing its rate path.

“They’ve got a week before they even have to take the decision. That week’s a long time. If things calm down in the next couple of days, I think we’ll go back to regular programming,” he says.

— with files from Global News’ Anne Gaviola, Aaron D’Andrea, Jackson Proskow, Reuters, and The Associated Press


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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

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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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St. John’s, N.L., airport closed after late night fire on 2nd floor forces evacuation



ST. JOHN’S, N.L. — A fire on the second floor of the international airport in St. John’s, N.L., resulted in the facility being closed late Friday night.

The airport authority said today the main terminal building was evacuated due to a “significant event” on Friday at 11:30 p.m.

No other details were immediately available.

The authority said in a release today it is working with police and the fire department to ensure all protocols are being followed before reopening the building.


The news release says the terminal building was expected to remain closed to the public until 6 p.m. on Saturday.

Passengers are being advised not to visit the airport until there is a public advisory the terminal has reopened.

This report by The Canadian Press was first published March 25, 2023.


The Canadian Press

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