If you are concerned about the U.S. bank contagion, you don’t have much to worry about. The U.S. banking crisis was triggered due to the loss of regulatory controls and too much exposure to long-term bonds that lost value in a rising interest rate environment. The Big Six Canadian banks have diversified asset portfolios and adequate liquidity and capital to meet withdrawal needs.
While Canadian banks don’t have much exposure to the failed banks, their acquisitions of U.S. regional banks could create short-term weakness. The Big Six could also feel the heat of a slowing macro environment, as central banks worldwide dry up liquidity to ease inflation. But they have the potential to ride the recovery rally and grow with the economy.