Banking concerns in the limelight

In a matter of weeks, Silicon Valley Bank has become a household name. Mismanagement and lax US banking regulations led to the bank’s failure in mid-March. The Credit Suisse rescue followed quickly – raising further concern about banks and the implications for the economy and monetary policy.

Fortunately, regulators and policy makers have been proactive. They took decisive action to protect the banking system and contain the impact of these events. Central banks have demonstrated that they have the tools to address the situation and have been nimble in responding.

These events will likely lead to stronger regulation and supervision of US banks – and additional rate hikes in the future are likely to be of less magnitude.

ONE Investment understands that these events can be unsettling for investors (and municipal councillors). ONE’s Chief Investment Officer Keith Taylor offers these key takeaways:

• The Canadian banks are strong and well-regulated and there are no hints of similar issues occurring in Canada. These are events are playing out in US/Europe where the banking system is very different from in Canada. 
• The conservative nature of Ontario’s Legal List investments helps to insulate municipal investors from events like this.
• In terms of Prudent Investor, ONE reached out to all our investment managers and confirmed that they do not hold any securities that are directly affected.
• These events underscore the importance of having a diversified portfolio.

Contact the ONE Investment Advisory Services team if you have further questions.