TORONTO — Credit rating agency DBRS Morningstar says funding levels at Canadian banks are stable despite about $57 billion in lost market capitalization for the Big Six banks over the past two weeks.
Analyst Carl De Souza says in a report out Monday that the failure of Silicon Valley Bank and Signature Bank are idiosyncratic and not representative of the Canadian banking sector.
He says that while the Big Six banks have lost about 9.2 per cent in market capitalization, they have diversified and stable funding and generally have lower exposure to the fixed-income securities that helped lead to Silicon Valley Bank's downfall.
Canadian banks do also have unrealized losses on long-term bond investments like Silicon Valley Bank did, but he says the losses aren't as big and that the banks aren't expected to be forced to sell them because of their more resilient deposit bases.
De Souza says Canadian banks should be able to navigate the current market turbulence, but that DBRS continues to closely monitor liquidity positions.
He says that the volatility will however likely result in higher funding costs, which can mean a hit to profitability.
This report by The Canadian Press was first published March 20, 2023.
The Canadian Press